Options pricing framework buckles under GameStop frenzy

Wild retail trading sees calls sink below intrinsic value ahead of expiry as puts break spot correlation

Mike Mozart

The retail feeding frenzy in GameStop shares and derivatives created extraordinary dislocations in options prices, leading some observers to question whether the current pricing framework is fit for purpose in a world where allied amateur traders are locking horns with professional investors.

Downside puts on the name entirely decoupled from spot markets, with the price barely moving as the stock whipped around wildly. Deeply in-the-money calls traded below intrinsic value ahead of expiry as

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