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Game Over?

The winning GameStop lottery tickets are being cashed in

Luke Kawa

Traders are taking profits in the boldest wagers that were made ahead of this week’s surge in GameStop.

In particular, we’re talking about the call options that would be in-the-money if GameStop broke above $30 by the end of this week. Shares of GameStop were as high as $64.83 in early trading on Tuesday, and as low as $21 as of 2:00pm ET on Wednesday.

We can infer these lotto tickets are being cashed by looking at how the trades in the $30-strike calls have been executed today.

For background: Trades can take place on the bid, the ask, or the mid.

  • The bid is the highest price a buyer will pay.

  • The ask, which is higher than the bid, is the lowest price a seller is willing to accept.

  • The mid – well, I trust you to figure that one out.

From April 25 – when we started to see activity in these options pick up – through Tuesday, volumes were fairly evenly split between those that took place on the bid, ask, or mid, with those on the ask side outnumbering the bid.

That’s not the story today: through 2:00pm ET, nearly five times as many trades in these $30-strike options are taking place on the bid versus the ask.

All else equal, if a trade is taking place on the bid, it suggests a motivated seller, one willing to accept the lowest price on offer. 

“Take the money and run,” said Michael Purves, CEO of Tallbacken Capital Advisors, on the price action in these options. “It would make a ton of sense for these long call options to be closed on the bid side.”

Open interest in the $30-strike call options that expire at the end of this week fell from 44,713 to 37,898 on Tuesday. That number looks like it’s due to fall further in light of the profile of these trades.

Closing out these (largely successful) wagers is one factor putting downward pressure on shares of GameStop today, which are down about 20% as of 2:00pm.

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Top Trump trade hit by Trump tariffs

In the early days of Trump 2.0, Axon, the maker of Taser, body cameras, and other gear for police and security forces, was a top Trump trade.

That is, it was one of the group of companies whose share prices soared on expectations of big changes — in this case a surge of spending on police and immigration enforcement — under the new administration.

And sales of the company’s security products, under its Connected Products division, did rise. But in the just-reported third quarter, costs rose more. And one of those rising costs was the Trump administration’s tariffs.

In its post-earnings conference call, Axon officials blamed tariffs for a large part of the earnings miss that sent the stock plummeting by roughly 20% in the after-hours session Tuesday.

“The impact from tariffs is obviously hitting the Connected Devices business overall. This was the first quarter that we had a full quarter of impact from tariffs,” Axon CFO and COO Brittany Bagley told analysts on the call. “So as we look at the year-over-year step down, that really is attributable to tariffs.”

She continued, “As long as tariffs stay in place, I view that as sort of a onetime adjustment. So now that’s baked into the gross margins.”

Clearly the market didn’t like the sound of that. But perhaps those tariffs may not stay in place.

Late in the morning, Axon sharply cuts its losses on the day — it had been down as much as 20% — as oral arguments in the Supreme Court case to determine the legality of President Trump’s tariff regime got underway. On balance, its seems the administration’s arguments were getting a chilly reception from the justices.

Axon shares extend fall as tariffs hurt the Taser maker's quarterly profit

Axon shares extend fall as tariffs hurt the Taser maker's quarterly profit

And sales of the company’s security products, under its Connected Products division, did rise. But in the just-reported third quarter, costs rose more. And one of those rising costs was the Trump administration’s tariffs.

In its post-earnings conference call, Axon officials blamed tariffs for a large part of the earnings miss that sent the stock plummeting by roughly 20% in the after-hours session Tuesday.

“The impact from tariffs is obviously hitting the Connected Devices business overall. This was the first quarter that we had a full quarter of impact from tariffs,” Axon CFO and COO Brittany Bagley told analysts on the call. “So as we look at the year-over-year step down, that really is attributable to tariffs.”

She continued, “As long as tariffs stay in place, I view that as sort of a onetime adjustment. So now that’s baked into the gross margins.”

Clearly the market didn’t like the sound of that. But perhaps those tariffs may not stay in place.

Late in the morning, Axon sharply cuts its losses on the day — it had been down as much as 20% — as oral arguments in the Supreme Court case to determine the legality of President Trump’s tariff regime got underway. On balance, its seems the administration’s arguments were getting a chilly reception from the justices.

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