GameStop (GME) experienced a sharp decline in its stock price on Friday, falling 3% as of this writing to $24.75 amid a flurry of unusual options activity, underscoring the stock's ongoing volatility since the focal point of 2021’s "meme stock" phenomenon began spiking again in recent weeks.

The video game retailer’s options market has been particularly volatile, as noted by popular stock market data resource Unusual Whales on Thursday.

The $125 calls expiring Friday saw a dramatic surge in implied volatility (IV) from 650% on Wednesday to 1,127% the following day. This spike in IV indicates significant uncertainty and speculation about the stock’s near-term movements.

Options trading allows investors to place bets on a stock's future price movements. The high IV in GameStop’s options suggests that traders are expecting significant price fluctuations. 

Specifically, the surge in IV for high strike price calls, far above the current trading price, implies that some investors are speculating on extreme price movements. This can create additional volatility as these positions are bought and sold, directly impacting the stock price.

GameStop's current volatility ties into a broader narrative of speculative trading that has surrounded the stock for the past year.

On June 7, the stock was halted 17 times and plunged 40%, highlighting the ongoing unpredictability and intense trading interest. This reflects significant retail investor engagement and the speculative nature that continues to drive GameStop's market performance.

Recent volatility has come amid the return of GME trader and influencer Roaring Kitty, aka Keith Gill, whose bull tweets and livestreams helped drive the 2021 meme stock surge. He returned to social media in May after a three-year hiatus and has helped drive up the price of GME, though his recent silence has coincided with a noticeable price dip for the meme stock.

Gill disclosed last week that he boosted his position in GME from 5 million to approximately 9 million shares, or about $223 million worth at the current price.

Adding to the intrigue, GameStop has also been mentioned in the ongoing trial of Bill Hwang, the founder of Archegos Capital Management. The trial revolves around allegations that Hwang manipulated the stock prices of companies like ViacomCBS and GSX Techedu Inc. 

During the trial, former Archegos head trader William Tomita testified about a chat with former CFO Patrick Halligan discussing GameStop.

"Is our long book going 'GameStop' on us?" Halligan asked, to which Tomita responded, "I have no idea what’s happening." The exchange highlights the impact of meme stocks on broader market dynamics and hedge fund strategies.

Edited by Andrew Hayward