GameStop (NYSE: GME) – Sell Put Options
Intro There is probably no intro needed for Gamestop, the ultimate meme stock that ran from less than $20 to around $235 per share in no time this year. Disclaimer: At current trading levels, it is very unlikely that Gamestop will be able to show future results that will justify the very lofty valuation and buying the stock now is pure speculation. With the significant increase in its share price, volatility rose substantially as well – and this is where it may get interesting. One, or probably the most, important parameter to calculate an option price is volatility. Volatility is measured in percentage and “boring”, mature stock usually show a volatility in the range of 15-20% and levels of above 50% are considered elevated volatility. Gamestop’s volatility is above 170% and therefore all Gamestop options outstanding are expensively priced by looking at the volatility. As will be further described below, a possible strategy might be to sell deep out of the money put options and profit...