Keith Gill, better known as Roaring Kitty, is at a critical juncture with his substantial GameStop (GME) options position as expiration looms. The meme stock hero is deciding how to manage his 120,000 call options, each tied to 100 shares, which represent a significant portion of his investment portfolio.
Gill’s position includes 5 million GameStop shares and 120,000 call options, which equate to control over 12 million additional shares. This massive options stake could pose significant challenges for Gill, especially if these options end up “in the money” or profitable upon expiration.
The Options Dilemma
Gill’s call options have a strike price of $20 and are set to expire on June 21. With GameStop’s stock currently trading around $30, these options are indeed in the money, providing Gill the right to buy shares at $20 each. Exercising these options would allow him to acquire 12 million shares at a substantial discount. However, the financial burden is significant, requiring $240 million to execute the options fully.
Gill’s latest screenshot shows he has $29.4 million in his E-Trade account, raising questions about his ability to exercise the options without additional funds. During a recent livestream, Roaring Kitty confirmed to his 600,000 viewers that he lacks institutional backing but hinted at the possibility of other financial resources.
Broker Intervention and Liquidation Risk
Without sufficient capital, E-Trade, Gill’s brokerage, may be forced to intervene. According to CC Lagator, co-founder of brokerage Options AI, if Gill’s options remain in the money and he doesn’t act, E-Trade could liquidate his options to avoid unmanageable risk. This could involve selling the options or issuing a “do not exercise” (DNE) order, which would mark the options as worthless, a costly outcome for Gill.
E-Trade’s client agreement allows the brokerage to act at its discretion, including canceling or reversing orders without prior notice. This authority means Gill’s fate could largely rest in the hands of his broker if he fails to manage his position proactively.
The Strategic Moves
One strategy for Gill could be to start selling his calls before expiration, thus securing profits and avoiding last-minute chaos. However, this move could negatively impact his public image, potentially labeling him a manipulator in a pump-and-dump scenario. Furthermore, the large size of his position means his actions would likely affect GameStop’s stock price, triggering a sell-off among retail traders.
Alternatively, Gill could roll his options to a later expiration date, buying more time but incurring additional costs. Rolling involves selling the current options and immediately buying similar ones with a later expiration. This tactic requires careful coordination, ideally with the brokerage’s risk and trading teams, to ensure smooth execution.
The High Stakes
If Gill manages to exercise all his options, he would control a total of 17 million GameStop shares, becoming the fourth-largest shareholder after Vanguard, BlackRock, and RC Ventures. However, selling his existing 5 million shares to fund the options would only be feasible if GameStop’s stock price exceeds $48, far above its current level.
Despite the high stakes, Gill has maintained a sense of humor about his situation. On Tuesday, he posted a meme on X (formerly Twitter) depicting a banana labeled “Options Basics 101,” highlighting the complexity and pressure of his predicament.
Conclusion
Keith Gill’s situation underscores the volatility and risks inherent in options trading, especially with high-profile meme stocks like GameStop. As the expiration date approaches, Gill’s decisions will be closely watched by both his followers and the broader financial community. His actions could significantly impact GameStop’s stock price and serve as a case study in managing large options positions under public scrutiny.
Key Takeaways:
- Keith Gill (Roaring Kitty) faces a significant decision with his expiring GameStop call options.
- Exercising the options requires $240 million, a sum he may not readily have.
- E-Trade could liquidate his options if he doesn’t manage them proactively.
- Rolling the options or selling early are potential strategies, each with risks.
- Gill’s actions will have a notable impact on GameStop’s stock and his public image.
