GameStop appeared to be on a sluggish decline, expected to lose money this year and the next. So why is the stock up more than 275% in the first month of 2021, and how can you trade GameStop stock options today?
With more and more gamers buying digitally and consoles coming out now sans disk drives, we wonder how long GameStop will actually be around.
And so did Citron Research. So much so that they had a livestream on YouTube planned that would give investors five reasons why GameStop would drop to $20 — technical difficulties led to them postponing the video.
However the video never came: An angry mob of Reddit users and investors on the WallStreetBets group began aggressively selling GME stock. This caused Citron Research to publicly announce it wouldn’t comment further on the video game retailers company within 48 hours.
While many are arguing that the stock is overvalued and due for a huge decline, here’s how to trade GameStop stock options in any situation.
In today’s video, I’m going to cover the perfect way to trade GameStop stock options— no matter the mainstream news hitting the market.
GameStop Corp. (NYSE: GME) has been in the media nonstop since Citron wanted to give out its short report on it, and was run off by loyal Reddit users. The stock has more than doubled and insiders have been selling at a record pace since then.
But at the end of the day there’s no sure way of how many dips and turns GME is going to take — we don’t have a crystal ball and the volatility on this stock is impressive these past trading sessions.
So instead of predicting where GME is going to go — and because the price of the options are outrageous with sky high volatility — we need to figure out how to successfully trade GameStop without being too directional by buying outright calls (if we’re bullish) or puts (if we’re feeling bearish).
I like to do it this way because, if you look at the weekly options of GME, we can see the “at the money straddle” — the price of the calls and the puts.
A straddle is also an options strategy where investors will buy a put and call option with the same expiration date and strike price. The only way to get money off of this is if the stock jumps or plummets from the strike price more than the premium that was paid.
One way I like to trade GameStop is by figuring out a bullish upside target and a bearish downside target.
For example, looking at the Jan. 22 weekly options chart I added the calls ($2.70) and puts ($3) and got $5.70.
From there you can add this amount to the current price of GME to get a bullish upside target, or subtract it to get a bearish downside target. But in this example, I also think the options are too expensive.
Check out my video below to understand why.
So in situations like this, I like to migrate towards a premium selling strategy and debit strategy all rolled up into one… I like to use this strategy when I want to get slightly directional with minimum risk and maximum reward.
Can you guess what it is?
Make sure to watch my video below on how to trade GameStop with this top-notch strategy. As always, leave your thoughts in the comments section below and don’t forget to subscribe to my YouTube channel to stay up to date with all things options trading.
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Imagine waking up and checking your phone for our latest trade alert, and then placing a quick Sweet Spot trade…
All we have to do is wait for the stock to enter the Sweet Spot, and exit when it hits our price target… and boom, collect your profits like a boss.
Then it’s time to celebrate! It’s simple, straight forward and as easy as it gets.