Transcription
Good morning everybody. Happy Monday. I hope you're having an amazing start to your week.
We're starting with Exodus 40:36, which is actually almost the end of the book of Exodus. It says, "And when the cloud was taken up from over the tabernacle, the children of Israel went onward in all their journeys." So you got the people now pursuing God. And it made me immediately think about the book The Pursuit of God by Toer. And this is such a good book. In fact, I was thinking back, it was been a long time since I read it, like five years, but it had such an impact on me. And I remember reading it, getting to the last page, and just being like, "That was so good." And starting back on page one and just starting and reading the book immediately over again.
So, the purpose of the book is to to teach us about living a quiet life so that we can know God's presence and have that personal relationship with him. And so, maybe it's time for me to read this again because that's what I'm trying to do here. And it just made me think immediately this passage about that book about God pursuing the people of Israel and then now them pursuing him. And it's just a beautiful image. So thank you God for this amazing week ahead.
What I wanted to talk about first was of course the purpose here is not to provide financial advice. What anyone does here is up to them. I just want to keep learning and growing my understanding of the situation. Uh, please, I hope that from whatever I'm saying here, and sometimes I can end up saying a lot and often be wrong. I'm I want to make sure I'm clear on that. I haven't said that in a while. I think I'm usually wrong. So, uh, take what I have to say and learn from it yourself and make good financial decisions.
And then we're going to use this graphic in a second here because we had had a few key questions yesterday. I liked what we did over the weekend which was Saturday talked about what can we learn from the weekend review and then Sunday we said what can we do uh or look for in the week ahead and it come up with this stuff here. So note to self I'm going to ignore corporate and social media uh noise and just focus on the data and the model here. Uh we got the end of Q2 in less than two weeks. So very important for the company.
Question of the week. Are we going to see Ultimator signals light up? We haven't seen those since the offering. So, I've got those right here. So, do we see this RSI dual smoother curl down? Head back to the yellow dotted line. It's been a while since we've done that. And then we see like the gray bar light up on both of these charts down here. That would be neat. We're right here near the yellow swap star thing that I've got on the chart. And usually there's lows around it, not necessarily on it. There was back here on 85. I'm also kind of thinking about if tariff day is 81 this year, August 1st, could that look similar to a year ago. So that's another question. I don't yet have it on the charts, but I'm pondering.
And then down here, we've got all our data. So what's cool is the first look for possible is do we see the lendpull refill after the big expiry? Because a July expiry has a lot of long duration options contracts here and they've all dropped off as of Friday. And then uh you've got that actually happening. So here's the lend pool refilling. And this has been a behavior that's long been observed. So this chart goes way back and we can see at the end of every month after that big expiry usually you see the lend pool refill but not always. And that's kind of interesting like it didn't really happen back here in the middle of 2023. Kind of curious about that. So and then here's our next question.
So we are seeing this one already. We could check that one off. Do we head this? Do we see the stock head toward max pain this week? So, it looks like we're going to open here 36 cents above it. Here's max pain. So, I've got the target for the week over here. Do we see the stock flutter around a bit at open on Monday? Maybe have some upside volatility or turbulence in the week. Maybe some downside turbulence, but largely stay within like this dollar range. That's what we did last week. we stayed uh within 50 cents to the upside and 50 cents to the downside of max pain or do we see max pain move? Last week it didn't move at all. This is not fixed. It could totally move.
And then the other question is do we see the 4hour PMO uh switch to red. So, we saw this flip green three weeks ago and we've been trading, you know, I'd say pretty positively up and sideways and overish uh for 3 weeks. And then does it it looks like it's beginning to curl down. So, does it cross spread here sometime this week? That's a long time for it to remain green to be honest. And then the Williams kind of looks like it's curling down. And once it does, do we just kind of trade maybe a little bit flat? And like we're trading very flat. Do we just keep like trading flattish? But then does it take this one off of its recent green dot and does this flip red kind of like it did back here last cycle? Because we're right in the first like third of the cycle. And usually what happens is the first third, the first month is very downward, but we we just got taken down with the offering so quickly right into the bottom and then we start to experience chop. So, red green oscillating really fast and then even over here, red green oscillating pretty decently fast on some turbulence into those final swaps and we get our earnings call September 9th, I think. So, it'd be cool. It'd be cool if this cycle looked a lot like last cycle because the formation, if this works, it does not have to work at all. Again, I'm often wrong. Uh, but we've got a cadence here of yellow swap if it's a thing. institutional filing window if we get increased ownership this cycle which I hope we do pink swap earnings red swap it's the exact same cadence as the last cycle yellow institutional filing season earnings red so it'll be neat to see if this all plays out with increasing volatility out here this is when IV started to move up because the other data point of huge importance is IV it's at a five-year low you You know, we were excited when it hit the low low 50s, like 52, but could it come all the way down to 42 or something? That'd be incredible.
Worth noting is that while this is a 5-year low for GameStop, it's still incredibly high compared to like other stocks. So, options are still extremely expensive. Someone asked a great question recently. They said, "What is IV? Who calculates it?" It's an automatic calculation and it's basically you're looking at the options pricing and saying like what are those options pricing implying about forward-looking volatility. Meaning what's the agreement between the buyers and the sellers of the options on what they expect to happen? Because if options are expensive that means that buyers are willing to pay a lot because they think it's going to be volatile and sellers are also in agreement. we're going to charge a lot because we think that this is risky to sell these things. So, we're pricing in a lot of potential volatility. So, what they do to calculate it is pretty complicated, but they backwards calculate black shells theorem off of what the options are currently priced at to see what that implies about the volatility versus what the volatility is in recent time period. So looking forward, the options market is essentially the prices on the options are basically saying nothing's going to happen relative to what GameStop's typically done. But what GameStop typically does is a lot of volatility anyway. So uh they're basically in this week here options are subdued. They're not very expensive. So buyers and sellers have agreed not a lot of risk here. Right here prices on options are pretty low compared to where they've been. And so they're saying like h not that much but like on certain experies they could be very high. So IV30 is only this period in time here but IV on say I don't know some other expiry like these uh further dated ones like maybe these ones in January. I don't know specifically what the IV is out here in January. But the IV at this expiry might be way higher than these ones because there's a lot of uncertainty uncertainty here. and the buyers and the sellers. The buyers are willing to pay more because they think that there's the possibility for volatility out here and the sellers are in agreement and they're like, "We're going to charge a lot because we don't know what's going to happen out here." Yeah, sure things might be subdued here, but we don't have the same expectation out here. So, it's the pricing giving you a sense for what the volatility could be, uh, is what IV is all about. And right now, it's very low. So basically, everyone in the options market is pricing options as if nothing's going to happen. Does that mean that nothing's going to happen? Not necessarily. Uh it's just their expectation, which could be totally flawed and wrong, and they could all get blown out. So, we'll see what happens. But that's this one.
Um, you know, it's just a very quiet week, but that's that's cause for concern, right? So or like you know uh cause not for concern it's like cause for in terms of the model performing it's like are we just going to do something ultra boring here and cruise into max pain we did that last week doesn't have to keep working but that's what I've got as the model uh right here predicting which is you know probably stay down here in the bare zone near max pain probably fluctuate 50 cents above it or 50 cents below it that's what the options market kind of is showing or pricing in. But you just never know if settlement comes in, is there anything due is the question, right? And is this the opportunity? Whoever's on the settlement side of things, I don't know when or why they press the button, but they occasionally do and it's so hard to predict. So, is a quiet week like this week the week when they'll they'll push that button and say, "All right, cool. Let's cycle it." Uh, or not, right? or they waiting until this institutional filing window because they're like, "That's a perfectly good week to do it. No one's going to ask any questions. They're going to be like, "Yeah, all kinds of great earnings or u filings from uh you know, Black Rockck, Vanguard, Renaissance, whoever. As those are piling in, you know, punch in some volume and no one's going to ask any questions and it runs way up and the filing season ends and they're like, "Cool. uh we managed to settle out whatever obligations came in from back here. So that's a thought. Could have happened there, could have happened this week. I think the probability is growing because we're just so far out from any sort of volatility, but maybe it was all settled during the offering, too. That would have been a great opportunity for anyone that needed shares to get a lot of shares. And we did see that big volume blip uh like an hour before end of day right at the bottom when it hit like 2155 and it was sitting there for a long time and then something came in and lifted at a dollar on enormous volume. So maybe somebody got a lot of shares during the offering and that's why it's so steady right now because any need for shares is pretty suppressed.
Those are the things on my mind. So that's what I'm looking at. Um, we'll see how this week performs. Uh, but on paper it looks very very unexciting because all we've got is like some tiny bit of echoing from one cycle ago, a bit of echoing possibly from two or three cycles ago. ETFs are doing a lot of nothing. Uh, and then we're heading into maybe the echo of calendar days plus 35 and onward from a lot of CAT errors. But then next week at we actually have these interest rate decisions. And last time when the US Fed cut their rates, GameStop lifted all three times that happened. That was a year ago. It was in September, October, and November. A half a point and then a point or a quarter point and a quarter point. So, we'll see what the US Fed does and if that has any kind of impact on GameStop this time around.
Someone asked another good question. They said, "In your model, did you take that into account on interest earned?" I did not. So that's worth noting is currently they're earning I believe 4 and a4% on their money market. If the Fed cuts their rate then we need to adjust that down and this really needs to go down to like 4%. We could do that right here. So if the rate gets cut then we could do that. That's going to impact the company significantly. And if they cut rates again and I don't know what they'll cut them to or if they will. Let's say they cut them again uh and they do something like this. That would actually take interest earned down quite significantly. Would we still have our best year ever? I think this auto filled, right? Because it's going to be 164 and 208. Yeah, I think we'd still get our best year ever, but that is a significant drop in interest. So, that would be unfortunate. Is that Did I set that all up right? I might not have. Anyway, so that's this one.
You guys, we'll see what happens. If this is the most boring week in the universe, that's that's an option. If we see some upside or downside volatility, I think both are possible. Downside because of the yellow swap, upside because of settlement, which seems overdue, or so I mean, or do we get some catalyst coming in out of nowhere? So, coming back to this again, it's really hard to always connect these back to what we're talking about with GameStop. However, I would say if you get the chance, this book, very good. It's a It's a short read. I feel it's such a uh speak to the heart book and very applicable to your life. I think I'll order it today because I don't know where my copy went. Read through it again. Hope you guys have an awesome day. I will see you tomorrow and let's go GameStop.