1. Setup Recap
Original call (for Tuesday, Dec. 9 after the close): down gap, -6% to -8% band, 61% direction confidence, and no guidance expected. The pre-earnings logic leaned heavily on the idea that the tape was fragile and that options were still pricing meaningful downside, with positioning/sentiment risk skewed negative.
2. What Actually Happened
GameStop delivered a headline tug-of-war:
- Revenue: $821.0M, below the Street’s ~$987.28M expectation.
- Adjusted EPS: $0.24 above the ~$0.20 estimate (per LSEG/LSEG-reported comps).
- Guidance/outlook: consistent with recent behavior, the release focused on results and did not provide a forward guide.
Net: even with an EPS beat, the big sales miss is what the tape traded.
3. Price Action & Scoreboard
Prior close (Tue, Dec. 9): $23.11 Open (Wed, Dec. 10): $21.57 Close (Wed, Dec. 10): $22.12
- Gap return: -6.66% (down)
- Session return (close-to-close): -4.28% (down)
Scorecard vs prediction
- Gap direction: Correct (down)
- Full-session direction: Correct (down)
- Reversal: No (gap-down, partial rebound, but still red on the day)
4. Options, Flows & Example Structures
The pre-earnings snapshot had the weekly straddle implying ~9.3%. The realized gap was directionally right but smaller than the implied move, and the close-to-close was smaller still. That’s the classic setup where:
- Directional puts / put spreads can work (direction pays),
- but pure long-vol (long straddle/strangle) may disappoint unless you managed gamma actively.
5. Hindsight on Reasoning & Weights
- What the market cared about: the top-line shortfall relative to expectations (especially in a story stock where revenue trajectory is the narrative).
- What the model got right: it treated this as a downside-skewed event and correctly leaned into a meaningful down gap.
- What to refine: when you’re expecting a down move but implied vol is rich, it’s worth leaning more toward defined-risk spreads than outright vol buys—especially in names that can “rebound off the lows” intraday.
6. Lessons & Playbook Updates
- Ticker-specific: GME can print “profit beats” without getting rewarded if sales miss badly. For this tape, revenue was the scoreboard.
- Process tweak: explicitly tag “headline driver” (sales vs EPS vs balance sheet/Bitcoin) and decide what would actually change the narrative.
- Trade design: when implied is high and you expect down, favor put spreads or calendars over naked long straddles.