Keith Gill appears to be cashing in some of his bullish bets on GameStop

As we all know, pressure plus time equals diamonds.

But in the case of GameStop and Keith Gill’s massive options position, time equals more pressure on diamond hands.

Open interest in GameStop call options that expire on June 21 with a strike price of $20 (C20s) fell from nearly 170,000 to about 112,000 on Wednesday. According to his portfolio updates, Gill held 120,000 contracts, making him the dominant holder of them. The activity suggests that he is monetizing this options position, though that hasn’t been confirmed.

Gill was facing pressure to do so because he lacked the necessary $240 million in cash required to turn those contracts into more shares of GameStop (at a discount to its trading price). There was even the risk of these contracts expiring effectively worthless if he was unable to exercise money-good options.

Prior to Wednesday, the total on-exchange volume for the C20s was less than 19,000 since Gill posted his last update to the r/Superstonk subreddit showing a position of 120,000 in the strike. For trades of 200 contracts or more, over 60% took place on the bid side (versus just 4% on the ask). Since the bid is the highest price a buyer is willing to pay, this suggests the sellers of these contracts were the more motivated party behind these transactions.

A bit of speculative math here: If we attribute all trades executed on the bid or mid side in the last half hour of trading – when the price of these options was in free-fall – to Gill, then this would point to proceeds of more than $41 million. At a cost basis of almost $35 million, that would mean returns on this trade would be in the neighborhood of 20% so far. (Here’s a little background on how trades take place on the bid, ask and mid.)

Between the shares of GameStop he already purports to own and cash on hand, Gill would then seemingly have more than enough liquidity at his disposal to exercise the remaining options (if the above assumptions hold).

To some GameStop loyalists, however, these actions may somewhat undermine the bull case for a company that hasn’t done much over the past three years and a stock that is lacking a fundamental thesis. 

Across social media, many GME longs thought that Gill exercising those 120,000 contracts at once would cause a squeeze higher because market makers would face intense difficulties coming up with the 12 million shares to deliver to him. That’s despite the fact that around 100 million shares have traded per day, on average, over the past 15 sessions.

Of course, the bigger challenge was always Gill coming up with $240 million to turn the options into shares, not market makers sourcing the stock.