1000% Implied Volatility In GameStop

[JSOP]

So you think a company that is continuing with archaic model of brick and mortar seller of cassettes and diskettes can revamp it's business model to do what?

Sony/MS/Nintendo don't need Gamestop at all. It is 2021. Digital distribution is 80% of the market.
Gamestop has the following:
Leases (Costs)
No real estate (No assets)
Old consoles to resell at 30% mark up (Depreciating assets)
Fixtures (Depreciating assets, already at 0)
Console Games on <COUGH>DISKETTE</COUGH> (Someday worth a couple of bucks)
Stream of clients (Not going to store, COVID19, Digital Downloads, Declining YOY)
Customer List (Asset, but Sony/MS/Nintendo have the same and better courtesy of Gamestop)

They do have cash, all hopes are real that it is actually there after cancelling leases, etc.
All they were is a middleman between two willing parties, the margins have dropped, the utility of a store has dropped by more. Both willing parties can deal directly now and have an immediate feedback between each other, without visiting a 1500 Sq Ft store manned by two they/them telling you about the awesomeness of anime.

This is alas Blockbuster, Hollywood Video (Sorry from Seattle), etc.... They are all dead. This is a Cash value as a company with no future I.e. $4 a share. MS/Sony don't even want to buy them as they are not a utility in any distribution channel in the next 36 months.

You think GME can do cloud game delivery? It's already there direct from manufacturers. When HL2 came out on steam first it was obvious GME is done. You think they can make a diskette more valuable to a generation of instant download folks that have killed VHS,DVD,Blue Ray?

One person's trash is another person's treasure. To somebody who has no imagination, of course everything is dead.

 

[Spaghetti Code]

https://www.fool.com/investing/2021/01/29/should-gamestop-help-the-shorts-and-issue-more-sto/

The high share price won't last. Eventually the bubble will collapse. It's possible if not likely that those who were short have already covered and moved on. Gamestop should simply lock in the gains that they already have. I don't know the mechanics of how capital raise would work, but apparently Tesla did something similar during one of its short squeezes a couple years ago. If GME had more cash on hand, that would improve their odds of survival for long(er) term.

I had the same question, but after reading more, I don't think they will sell more shares. The GME saga started with Michael Burry telling Game Stop management to buyback shares in 2019. Game Stop bought a lot back, raising the price (which his fund owned), after which he began to cash out.

That said, I can see the share went back up afterwards, so I am not sure if they re-liquidated after:

Outstanding shares:
https://www.sharesoutstandinghistory.com/?symbol=GME


Burry's holdings:
https://public.tableau.com/shared/S...rigin=viz_share_link&:embed=y&:showVizHome=no

 

[ET180]

That's what I was thinking. HTZ did it when that squeeze happened

I thought HTZ commented about issuing more shares, but they got blocked by the SEC or decided that they could not because they had already filed or announced intent to file bankruptcy. Bankrupt company can't issue shares.

 

[ET180]

Yeah, but I am wondering how many new shares are ALREADY authorized to be issued?? And how many of these new shares are in the market right now?? With all the noise over the past few days, I heard something about authorized new issues from months ago. Those are the ones I am wondering about...

PS When are stock grants made to management?? Usually with grants, they can only sell a limited amount at a time...

I think companies have to announce the issuance of new shares for employee compensation. However, if memory serves me correctly, Tesla got approval to release new shares within a few days of their short squeeze in 2019?...if I recall correctly.

 

[Cabin111]

I think companies have to announce the issuance of new shares for employee compensation. However, if memory serves me correctly, Tesla got approval to release new shares within a few days of their short squeeze in 2019?...if I recall correctly.

Wait, Tesla is buying GameStop?? Is that right...Or is GameStop buying Tesla? I'm so confused...I'll check on my Blackberry.

 

[Pronto24]

Everyone in the company should sell their shares, exercise options then declare 20 for 1 reverse stock split.

 

[Aquarians]

What does 1000% implied volatility mean in layman’s terms?

At this level it ceases to have any meaningful meaning. Volatility is useful for describing small variations around a point but in this case, stock going from $500 to $150, we're talking about jumps.

So the market seems to have thought that a reversal to $500 is possible (a jump back), problem is the Black-Scholes model is not supposed to support this use case. It sort of shoehorns it by calculating: "what's the totally meaningless number we need to put for this parameter such that going from $150 to $500 in a day is still within the probable realm? Oh, 1000% volatility, OK then, let's use that."

 

[Matt_ORATS]

At this level it ceases to have any meaningful meaning. Volatility is useful for describing small variations around a point but in this case, stock going from $500 to $150, we're talking about jumps.

So the market seems to have thought that a reversal to $500 is possible (a jump back), problem is the Black-Scholes model is not supposed to support this use case. It sort of shoehorns it by calculating: "what's the totally meaningless number we need to put for this parameter such that going from $150 to $500 in a day is still within the probable realm? Oh, 1000% volatility, OK then, let's use that."

What do you think about the Parkinson model of calculating historical volatility that can produce a one day historical volatility? The one day volatility Thursday was 1500%. We may say the IV and HV are irrelevant at these levels but at least they are comparable.

 

[Aquarians]

What do you think about the Parkinson model of calculating historical volatility that can produce a one day historical volatility? The one day volatility Thursday was 1500%. We may say the IV and HV are irrelevant at these levels but at least they are comparable.

Never heard of it. I found this: https://derivvaluation.medium.com/p...on-volatility-analysis-in-python-8ffee87f1a84

If so it doesn't look that different from the classical way. Unless I see the exact way to derive "one day HV", I can only assume. The accuracy of computing volatility from samples is a matter of number of samples used. "Historical 252 days volatility" is using 252 samples, so one year. Therefore I assume 1 day volatility is using either: intraday samples (but how many?). Or daily samples including open, close, lo, hi, but how and most importantly how many samples? Still 252? The fewer you use the more "wild" the result can be.

Problem with small number of samples are outliers. Stock jumping from 500 to 150 means the return is Ln(150/252) = -1.2. Other samples are in the 0.01 range, so a difference of 100x in magnitude. If the calculation doesn't use many samples, one or a few outliers will dominate the result and practically pollute it.

In practice volatility calculation discards the outliers, so a few jumps will not influence the volatility at all. So I think it's just another calculation artefact (an incorrect one). Correctly, the jump would have been ignored at all in calculation so there would be no change in historical volatility, surely not jump to 1000%.

 

[vegamedic]

But this is way too exaggerated though. Stocks rarely move by 1 std deviation and even according to an index.

Standard deviation moves are garbage in the context of gap risk. Not to mention a 1sd move only captures ~2/3 of moves in a normal dist.