As Roaring Kitty continues to watch his favorite GameStop shares swing wildly, he might be contemplating what to do with his massive options position that is approaching expiration.
The meme stock champion, whose real name is Keith Gill, has so far held onto his positions of 5 million GameStop common shares and 120,000 call options, according to a screenshot he shared Monday evening. The mammoth options position — involving 12 million underlying GameStop shares — could be a nightmare for Gill to offload or exercise even if the calls end up profitable or “in the money.”
His call options against GameStop have a strike price of $20 and an expiration date of June 21. Shares of the video game company have gained about 8% so far this week to around $30 a share. If the stock trades above $20 that Friday, which makes his call position in the money, Gill could exercise the options at $20 apiece, allowing him to purchase an additional 12 million shares at the discounted price. However, many think it’s unlikely he has enough capital to pull off such a move.
For Gill to exercise the calls, he would need to have $240 million to take custody of the stock (12 million shares bought at $20 apiece). His last screenshot showed he has $29.4 million in cash in his E-Trade account, though he could deposit more money from other undisclosed accounts.
During Friday’s livestream, Roaring Kitty told some 600,000 viewers that he doesn’t have any institutional backers, but he didn’t entirely rule out the possibility of having more cash elsewhere.
E-Trade dilemma
Let’s say he doesn’t have the $240 million to exercise the calls. As June 21 looms, his broker E-Trade may have to intervene by liquidating his options before expiration.
“If they remain in the money and he doesn’t close them, the brokerage may be forced to take action on his behalf,” said CC Lagator, co-founder of brokerage Options AI.
The Morgan Stanley-owned E-Trade declined to comment.
E-Trade’s client agreement for self-directed accounts stated that the brokerage may decline, cancel or reverse a client’s orders or instructions at its discretion and without notice.
If Gill doesn’t give an instruction prior to expiration, the broker could sell the contracts that his cash balance doesn’t support, or submit a “do not exercise” (DNE) order for the same amount.
“The DNE option would be extremely costly as it marks them at zero. I’d imagine they would be in contact in the days ahead to make sure he has a plan. They can’t wait until the last hour,” Lagator said.
E-Trade has been debating whether to ban Gill from the trading platform over concerns regarding potential market manipulation, The Wall Street Journal reported last week.
