GameStop Powers Up For Bullish Break, Institutions Hammer Calls

GameStop Corporation GME surged 35% higher at one point Tuesday afternoon and slammed into a resistance level at the $277 mark. On Wednesday, the stock was consolidating the move by trading sideways on shorter timeframes.

The consolidation was needed because GameStop’s relative strength index reached 70% on Tuesday. For technical traders, when a security’s RSI measures 70% or higher the stock is in overbought territory which is a sell signal. Bulls will want to see further consolidation for GameStop to power up for another push north.

GameStop has a gap above on its chart between about $288 and $296. Gaps fill 90% of the time so it's likely the stock will trade up into the levels in the future. Some bullish traders may believe GameStop will be headed toward the gap sooner than later and on Wednesday continued to hammer bullish options.

First thing Wednesday morning, a number of institutions sold call contracts to lock in profits when GameStop double topped at $227. Beginning at 10:30 a.m. ET, when the stock began to pull back, a number of institutions began purchasing bullish options. In total, the traders bought over $1.59 million worth of call contracts.

One trader made a $300,000 bet GameStop would make its way toward $500 by Sept. 17. The trader bought 375 call contracts for $8 per piece.

See Also: If You Had $1,000 Right Now, Would You Put It On AMC Or GameStop?

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call or put option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The GME Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

  • At 10:31 a.m., a trader executed a call sweep near the ask of 200 GameStop options with a strike price of $310 expiring on Aug. 27. The trade represented a $100,000 bullish bet for which the trader paid $5 per option contract.
  • At 10:32 a.m., a trader executed a call sweep near the midpoint of 288 GameStop options with a strike price of $250 expiring on Aug. 27. The trade represented a $273,024 bullish bet for which the trader paid $9.48 per option contract.
  • At 10:32 a.m., a trader executed a call sweep near the midpoint of 242 GameStop options with a strike price of $225 expiring on Aug. 27. The trade represented a $388,558 bullish bet for which the trader paid $13.99 per option contract.
  • At 10:32 a.m., a trader executed a call sweep near the ask of 250 GameStop options with a strike price of $225 expiring on Aug. 27. The trade represented a $385,500 bullish bet for which the trader paid $15.42 per option contract.
  • At 10:32 a.m., a trader executed a call sweep near the midpoint of 208 GameStop options with a strike price of $320 expiring on Aug. 27. The trade represented a $106,704 bullish bet for which the trader paid $5.13 per option contract.
  • At 10:33 a.m., a trader executed a call sweep near the ask of 339 GameStop options with a strike price of $330 expiring on Aug. 27. The trade represented a $162,720 bullish bet for which the trader paid $4.80 per option contract.
  • At 11:08 a.m., a trader executed a call sweep near the ask of 252 GameStop options with a strike price of $250 expiring on Aug. 27. The trade represented a $199,836 bullish bet for which the trader paid $7.93 per option contract.
  • At 11:33 a.m., a trader executed a call sweep above ask of 207 GameStop options with a strike price of $320 expiring on Aug. 27. The trade represented a $65,412 bullish bet for which the trader paid $3.16 per option contract.
  • At 1:12 p.m., a trader executed a call sweep near the ask of 375 GameStop options with a strike price of $500 expiring on Sept. 17. The trade represented a $300,000 bullish bet for which the trader paid $8 per option contract.

GME Price Action: GameStop is trading down 1.4% to $207.30 at the time of publication.

Posted In: OptionsTop StoriesMarketsTrading Ideas

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