Question about Roaring Kitty’s position
$GameStop (GME.US)$ As per CNBC, “Roaring Kitty has 120,000 call options against GameStop with a strike price of $20 that expires June 21.” Means, If the market price of GameStop is above $20 before or on June 21, he can exercise the options to buy shares at $20 and potentially sell them at the higher market price for a profit. Is that the reason shorties are trying to make it below $20?
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MaoShanWang : Of course.. I doubt it will be below $20..
NelsonP : Yes. Even though the stock price is above $20, excising 120K calls needs 240M cash. He doesn’t have that much cash in his account unless he can add more.
OneDirection OP NelsonP : I see. Then why he is having that much call options?
Calvin777 NelsonP : So what do u mean dead or holders are going to the moon
NelsonP OneDirection OP : He can close some of them without excising them
Ken Griffin Charity : No, he can’t exercise his calls, at least not all of them, because doing so requires $240M (exclusive of fees) in capital that he does not have.
And even if he did somehow have $240m hidden away somewhere (which he said during his stream he did not), there would literally be no point in exercising his calls because he would end up losing a small fortune in fees. The much more sensible thing for him to do is to sell his calls while it’s still in the money.
PS: US options can be exercised at any time before the expiry date; they can be even exercise out of the money.
Ken Griffin Charity OneDirection OP : The majority of traders trade in options without having any desire of exercising them. Reduced costs are one of the main reasons why options are preferable over stocks.
OneDirection OP Ken Griffin Charity : Oh. When he sell his calls means he lost his options from his account? And no activity is allowed?
Ken Griffin Charity OneDirection OP : Yes, options are securities; they are bought and sold just like shares. He can always sell his calls and buy new ones if he wants.
OneDirection OP Ken Griffin Charity : I see. So if he is selling calls then he can just pay for premium and leave?
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