A day-trader on popular Reddit community WallStreetBets has claimed they scored an enormous gain on GameStop’s controversial 261% rally this year.
The user going by ‘DeepF—–gValue’ – censored for content – showed he turned an initial investment of $53,566 in GameStop call options into a stack of $11.2 million.
Several Redditors have increased their wealth at the expense of GameStop haters who were betting on the company’s inflated valuation, but this user has so far turned out to be the champion.
Insider has not independently verified the Redditor’s claims of turning a profit on GameStop.
The trader initially showed his call positions doubling in value three weeks after Michael Burry’s Scion Management called on GameStop to buy back $238 million in shares on August 19, 2019 and a report warning about the dangers of shorting the stock.
An obsession with the video-retailer by online traders has fuelled outsized volatility over the past three weeks, followed by numerous trading halts. Bullish bets began around the time GameStop agreed with activist investor RC Ventures to add three members, including Chewy founder Ryan Cohen, to its board. The board overhaul was largely seen as a positive for the retailer.
Members on the WallStreetBets community piled into the stock on January 13, encouraging one another to push out short-sellers holding bearish positions. The stock closed 51% higher that same day. A handful of retail traders on TikTok also crowed about how GameStop was going to see frenzied buying again.
GameStop’s shares are up 633% since the end of October and 308% year-to-date. “A wild ride and the retail day traders seem to be targeting and battling institutional shorts at the moment with the former generally winning in recent days and weeks,” Deutsche Bank analysts noted.
What happened with GameStop’s stock is a reminder of how times are changing, according to Edward Moya, a senior market analyst at OANDA.
“A new army of traders are not focused on valuations, but rather by momentum opportunities they see from Reddit’s WallStreetBets, YouTubers, TikTok, or Robinhood,” he said. “Top research shops will now have to consider how millennial traders are positioning themselves. GameStop does not deserve a valuation over $90, but that might not matter if influencers keep retail traders buying.”
GameStop shares rose a further 14% in pre-market trading Tuesday, to $88.83 per share.