BUCKLE UP: GameStop Mania Starts Anew as Reddit Users Fuel Stock Surge of More Than 400%

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Stock in GameStop surged on Thursday by more than 400 percent compared to the previous day, the second time it increased at such a pace in less than a month.

The stock, which began Wednesday at just $45, rose to $91 by the end of daily trading. It surged again on Friday to a peak of nearly $180 settling in around $140 as of Thursday afternoon.

Analysts said they observed a surge in purchases for call options beginning on Wednesday afternoon. Call options give purchasers the right, but not the obligation, to purchase shares at a set price in the event they rise. The move can prompt a “gamma squeeze” by requiring market makers to buy the stock as a hedge, thus causing the price to rise.

As of Thursday afternoon, tens of thousands of users on Reddit’s “WallStreetBets” forum had indicated their interest in pursuing a gamma squeeze, with more than 45,000 “liking” a post that suggested the move, with hopes the stock’s price would hit $800.

Bloomberg columnist Matt Levine noted the move in a Thursday column, and provided his assessment of the situation, though without mentioning Reddit’s role in the development:

Yesterday someone bought thousands of GameStop call options with an $800 strike price expiring tomorrow. They cost 87 cents per share. If the stock closes above $800 tomorrow those options will pay out; also though all notions of money and value and human society will be rendered meaningless, so I don’t know what you’ll do with your payout.

GameStop’s stock last surged in January from $60 to more than $460 in a matter of days, fueled Reddit users taking aim, in part, at hedge funds who bet on the stock’s price decreasing. Melvin Capital, which began the year with $12.5 billion in assets under management, lost 53 percent of its holdings in January as a result of that surge. Point72 Asset Management lost 10 percent.