Between January 11, 2021, and January 27, 2021, shares of GameStop Corp. (NYSE: GME) rose from around $5.00 to $95.00, an all-time high for the stock, a jump of more than 1,600%. GameStop was the poster child for the meme stock craze that lasted about a year but still left GameStop shares with a gain of about 170% over a period of nearly three years.

This time is different, sort of. Instead of the short squeeze that characterized the meme stock era, retail investors are loading up on call options, betting on huge gains in the shares after the company reports quarterly earnings next Wednesday afternoon.

Not exactly a short squeeze

GameStop stock was down more than 50% before Tuesday’s sharp 13% jump. Shares opened at $11.91 and closed at $13.49. According to a report from Barron’s, investors were pouring into December 8 call options with strike prices of $22.00 and $22.50.

Those options, purchased when the stock was trading below Tuesday’s closing price, could easily earn a 10x reward. The last price quoted for an options contract of 100 shares when the stock traded at $13.00 was $0.83 per share. If the shares rise to $22.50 on December 8, an options trader would realize a profit of around $9.00 on each share.

Conversely, if the stock does not reach that level, the trader will want to sell the options contract, but there will be few (actually, zero) buyers. Depending on the size of the investment and whether or not it was bought on margin, an options trader could lose big.

Nobody knows anything

A quick scan through some comments on Reddit’s r/gme thread indicates that something’s happening here, but what it is ain’t exactly clear.

Shorts got a sneak peek at next week’s earnings results is my guess and are trying to cover. For weeks/months they have been setting these massive Call walls to limit the upside, and now the walls are tipping over one by one.

Here’s another, with a comment attached:

Fake pump I’d assume at this point? Would love to be dead wrong

It was fake, it will go down and up before December 6

What about the shorts

When meme stock mania hit GameStop in 2021, the company had around 65 million shares outstanding, and short interest in the stock was around 50%, according to Fintel data. As of Tuesday, there are roughly 305 million shares of GameStop outstanding, and short interest in the stock is 19.9%. Lots of scared short sellers drove GameStop shares higher in 2021 when they covered their positions. A similar rush to cover is unlikely this time.

Will there be enough short covering to set off another short squeeze? Probably not. Without it, call options may have trouble reaching their $22+ strike price.

At last look, GameStop shares traded up about 13.4% at $15.48 in Wednesday’s premarket session. The stock’s 52-week range is $11.83 to $27.87.

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