• A cryptic post by stock influencer "Roaring Kitty" led to a surge in GameStop shares.
• A trader leveraged this, buying 10,000 GameStop call options minutes before the post, and selling them shortly after for a $550,000 gain.
• This isn't the first time "Roaring Kitty's" posts have influenced the stock market, previously causing a rise in Chewy stocks.
• The influence of social media on stock market activity continues to be a contentious issue due to potential for market manipulation.

In a recent turn of events, a well-timed trade in GameStop's options yielded a significant profit on a Friday. The catalyst for this financial windfall was a cryptic post on social media platform X by an account associated with Roaring Kitty, a stock influencer and ardent advocate for the video game retailer.

Roaring Kitty, whose real identity is Keith Gill, has a substantial following among retail traders. His social media updates, which often trigger a flurry of activity in the shares and options of stocks he mentions, are eagerly anticipated.

This particular post, his first in over two months, featured an image from the 1999 film Toy Story 2, modified to depict a dog's face over one of the characters. The impact of Gill's post was immediate and significant. GameStop shares surged by as much as 9% on the day, later settling to a 4% increase at $23.39.

The Timing and Impact of the Trade

The timing of the post and the subsequent market reaction appears to have been leveraged by a trader who bought approximately 10,000 GameStop Sept. 13 call options with a strike price of $22.5 for about $1.74 million, roughly 18 minutes before Gill's post, which was published at noon.

In a swift turn of events, about 20 minutes after the tweet, two blocks of these options, each comprising 5,000 contracts, seem to have been sold for a total of about $2.29 million.

Given that only about 4,300 of these contracts were open prior to Friday, it is highly likely that the position being closed was the same one that had been opened minutes before. This quick-fire trading strategy netted the trader an estimated $550,000, or a gain of about 30%, according to Reuters calculations based on LSEG data.

The Influence and Controversy of Roaring Kitty

Brent Kochuba, founder of financial insights company SpotGamma, commented on the situation, stating, That's a lot of short-dated calls just before a weekend, where you don't have a whole lot of time to expiration, so you need a quick move, which also makes it a little more egregious. He added, It's going to raise eyebrows, no doubt about that.

This is not the first time Gill's social media activity has influenced the stock market. In June, he posted a picture of a puppy on social media platform X, sparking speculation that the post could be a reference to Chewy. The stock rose to a near one-year high following the post. A regulatory filing later revealed that Gill had bought a 6.6% stake in Chewy three days before his post.

However, Gill's influence has not been without controversy. In July, investors in GameStop withdrew a lawsuit accusing Gill, who helped spur the meme stock mania of 2021, of defrauding them through a pump-and-dump scheme for the video game retailer. On the Friday in question, Chewy shares were up 1.5% at $26.54 after recovering from a nearly 4% drop following Gill's post.

As demonstrated by the recent GameStop options trade, the power of influencers like Roaring Kitty to sway market activity can result in significant financial gains for those who can accurately predict and respond to these trends. However, the ethical implications and potential for market manipulation associated with this influence remain a contentious issue.