It looks like we’re witnessing another classic case of Wall Street trying to put the underdogs back in their cages. Roaring Kitty is getting sued over the GameStop short squeeze that threw the stock market in chaos.
Keith Gill, aka Roaring Kitty, was one of the loudest voices pushing the GameStop Corp. (NYSE: GME) frenzy on the WallStreetBets Reddit forum. This week he got slapped with a lawsuit accusing him of securities fraud just because a large trader sold about $200,000 worth of naked calls on GME…
And lost big time.
A naked call is an aggressive options strategy where an investor sells call options without actually owning the underlying security. While a strategy like this can be profitable, the investor exposes themself to unlimited losses if their bet that the stock will fall is wrong.
In order to sell naked calls, you need to use a margin (the money investors must put in their accounts as collateral before they begin selling options).
To be able to sell that amount of naked calls, you need to have a seven-figure account at minimum. Basically, the large trader was looking at GameStop’s low price (still below $100 when he sold the calls) and betting against the stock’s rise.
But guess what?
GameStop exploded, and the large trader got burned. He blew up his account and had to buy back the call options when the shares were well above $400…
So, of course, Roaring Kitty was slammed with a lawsuit that accuses him of using his social media influence to advertise the stock — causing it to inflate massively — while misrepresenting himself as an amateur investor.
And that’s not even the most shocking way Wall Street is catering to the 1% right now…
Check out the video below to see what’s even more surprising about Roaring Kitty getting sued over the GameStop rally. As always, leave your thoughts in the comment section below and don’t forget to subscribe to my YouTube channel to stay up to date with all things options trading.
P.S. After learning everything that’s wrong with Roaring Kitty being sued over the GameStop short squeeze, read below.
Legendary trader Jeff Zananiri just told us about a breakthrough trading strategy so powerful, he’s already used it to signal 20%, 30% and even 50% winners overnight…
How does he do it? By simply buying certain stocks right at the market’s close and then selling them again the next morning.
We almost didn’t believe Jeff when he told us about his overnight strategy, but then we started digging into the 3 p.m. EST market phenomena that Jeff calls a Burn Notice.
Spot a Burn Notice at the end of the trading day and you could end up grabbing double-digit returns the very next morning.