Use this GME Put Spread to Take GameStop’s Losses to the Bank
January of 2021 ushered in a new era for the markets when the actions of a few internet-savvy traders set off an unprecedented trend in retail trading.
Where once GameStop Corp. (GME) could never break above $20 per share, its stock price was driven through the roof and beyond by Redditors preying on what hedge funds assumed was a safe and easy profit-play. For months, retail made up over 20% of the market’s total volume of trades, and they had institutional traders on the run.
A lot has changed since then – the Russia-Ukraine War, the fed funds rate hike, rising fears of stagflation – but one thing remains the same: GameStop is struggling.
The company completely whiffed on earnings on Friday, announcing a loss of $1.86 per share.
But while other investors bail on the stock or buy up shares expecting a rally, I have a better strategy – one that gives you a shot at turning GameStop’s earnings loss into your own 100% gain.
Your GameStop Corp. (GME) Trading Strategy
On Friday, the company reported quarterly results that included revenue of $2.25 billion and an adjusted earnings loss of $1.86 per share.
On the top line, the revenue numbers were slightly ahead of expectations, but on the bottom line, analysts were expecting an $0.84 profit. That’s a huge whiff on earnings.
As you might expect, shares dropped 9.98% in early Friday trading but then quickly reversed to a 7.5% gain within 30 minutes of the open.
That represents a 17.48% swing to the upside for a company that just missed analyst estimates by a country mile.
Friday’s conference call lasted just under 11 minutes and was short on details about how, what, and when the company plans to do to turn itself around – other than to say it has plans to launch an NFT marketplace by the end of fiscal Q2/2022.
Other than the retail crowd scooping up shares on the cheap in hopes of creating a rally, the Street is losing confidence in what its plan is for the future.
The company has missed earnings estimates for the last three consecutive quarters, with the miss widening from $0.10 in Q3/fiscal 2021, to an $0.87 miss in Q4/fiscal 2021, and now a massive $2.70 miss in Q1/fiscal 2022.
It’s no surprise, then, that shares of GME have lost 63.85% since November 22 of last year, and I see that trend continuing after Friday’s results.
I like buying the GME April 22, 2021 $80/$75 Put Spread for $2.00 or less. Plan on selling the GME April 22, 2021 $80/$75 Put Spread for a 100% profit or if shares of GME close above $100.00.
Blink Charging Co (BLNK)
I’m also watching Blink Charging Co (BLNK), the electric vehicle charging station provider.
With the price of gasoline in the United States surging, a lot of people are taking a hard look at electric vehicles (EVs) as an alternative to getting gauged at the pump when they fill up.
I think that could push shares of EV-related stocks higher, especially considering the Biden administration’s goal of electrifying automobiles in the U.S.
BLNK hasn’t turned a profit yet, and it’s not expected to move into the black anytime soon, but that won’t stop traders from buying shares if President Biden starts talking about electrification as a means of combating inflation.
Shares of BLNK have been trading sideways, in a wide base, since early February 2022, and they look like they could be ready to break out above resistance a make a move higher.
If shares of BLNK trade above $25.75 by March 25, let’s buy the BLNK April 22, 2022 $27/$28 Call Spread for $0.45 or less. Plan on selling the BLNK April 22, 2022 $27/$28 Call Spread for a 100% profit or if shares of BLNK close below $21.00.
United Airlines Holdings Inc (UAL)
And finally, let’s take a look at United Airlines Holdings Inc (UAL).
Just when it looked like we could finally establish long-term reopening investments, spiking inflation, soaring energy prices, and a new European variant of COVID-19 all made an appearance.
Ugh. Even though airline stocks have seen a nice rally since the beginning of March 2022, I think the travel industry could be in for another short-term move to the downside.
I like buying the UAL April 22, 2022 $38/$37 Put Spread for $0.40 or less. Plan on selling the UAL April 22, 2022 $38/$37 Put Spread for a 100% profit or if shares of UAL close above $45.00.
Now, that’s it for Monday but we aren’t done tackling this week. There is so much more to come, so stay on the look out.
In today’s Total Wealth, What exactly do you mean when saying “buy the 80/75 put spread”? On TOS, I only know how to buy or sell the options individually, with two successive actions. So do I buy the 80 put (Apr22 GME) and sell the 75 Put? (The difference at the moment is over $3.00, so out of range).
There is a report on options under the “special reports” tab that you might find helpful. Investopedia also has a good article on put spreads that should answer your question, too.