Chamath Announces That He Bought 50,000 February $115 Gamestop Calls

Shares of Gamestop rose over $10 in about a minute earlier today after prominent investor Chamath Palihapitiya announced that he had completed a large purchase of February $115 calls.

We've detailed the recent spike in shares of Gamestop in recent days. A number of big short-sellers, including Melvin Capital and Citron Research, have been squeezed as a result of retail traders (mainly hailing from the WallStreetBets community on Reddit) piling into Gamestop common shares and calls.

This has resulted in a massive short squeeze (well over 100% of the shares of Gamestop are short) and a gamma squeeze as well, as retail traders have purchased masses of out of the money calls. This means that market makers need to buy shares of Gamestop in order to hedge their positions, which has helped to propel Gamestop even higher.

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Earlier this week, Chamath Palihapitiya, who is a billionaire investor that owns positions numerous companies including Virgin Galactic and the Golden State Warriors, asked his Twitter feed what he should throw a couple hundred grand into:

Tell me what to buy tomorrow and if you convince me I’ll throw a few 100 k’s at it to start.

Ride or die.

— Chamath Palihapitiya (@chamath) January 26, 2021

The consensus? A very large purchase of OTM (Out of the Money) Gamestop calls, so that is what Chamath said that he did:

Lots of $GME talk soooooo....

We bought Feb $115 calls on $GME this morning.

Let’s gooooooo!!!!!!!! https://t.co/XhOKL1fgKN pic.twitter.com/rbcB3Igl15

— Chamath Palihapitiya (@chamath) January 26, 2021

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As of this moment, shares of Gamestop are trading at around $88, well off of their Monday highs.

The move in Gamestop has already resulted in near-decimation of Melvin Capital, who were forced to accept a cash infusion from Citadel and Point72 in order to keep their doors open, as the fund is down roughly 30% on the year according to the Wall Street Journal.

Citron Research, another prominent short-sellers, announced today that they are still short.

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Gamestop traders are hoping that Chamath's reported move will help to keep the squeeze going, as market makers will need to purchase shares in order to hedge this large 50,000 call purchase.

Will it work? Will the squeeze keep going?

Filed under: General Market News