For every GameStop call option traded on Wednesday, there were about 3.5 puts that changed hands, the highest ratio in more than a year. Call options rise in value when a stock gains while puts appreciate when the underlying stock declines.
GameStop puts have overtaken calls since Friday after six straight weeks of predominantly bullish flow. Of the top 20 most heavily traded GameStop options contracts on Wednesday, 18 were puts.
"You do have, potentially, speculators who are betting this bubble is going to deflate at some point," said Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research.
The rise may also be coming from holders of GameStop shares seeking to protect their gains against a potential decline, Frederick said.
Another possible explanation may be that investors who had to cover short bets against GameStop's stock are now buying the options as a cheaper way to bet on an eventual price decline, said Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group.
"The less riskier position would be to buy puts, because there's a limited amount you can lose. That might be why we're seeing more put volume," Murphy said.
Options, which offer investors a cheap way to place leveraged bets on big moves in stocks, have played an important role in driving GameStop's breathtaking rally.
Put contracts to position for GameStop shares sinking below $40 by mid-March are among those that have seen the largest jump in open contracts. Puts at the $20, $30 and $60 strike prices have also drawn significant buying in recent days, data showed. GameStop shares ended 134.8% higher at $347.51 on Wednesday.
Short sellers including Citron Capital and Melvin Capital Management retreated on Wednesday with heavy losses in what has been dubbed a battle between Wall Street and retail investors, who have lately targeted stocks with big short positions.
While GameStop options bulls may have eased a bit, options traders in AMC Entertainment Holdings Inc, BlackBerry Ltd and Nokia Oyj - other stocks that have seen massive rises recently - remained aggressively bullish.
About 1.5 million GameStop contracts traded on Wednesday, the company's second-highest daily volume ever, according to options analytics firm Trade Alert.
(Reporting by Saqib Iqbal Ahmed and April Joyner; Editing by Ira Iosebashvili and Sonya Hepinstall)
By Saqib Iqbal Ahmed and April Joyner
