Use this GME Put Spread to Take GameStop’s Losses to the Bank

Shah Gilani|March 21, 2022

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.

Cheers,

Shah