Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Call Trading Hits Fever Pitch on Electronic Arts Inc. (EA)

One moderately optimistic trader employed a bull call spread on EA

by 12/18/2013 2:19 PM
Stocks quoted in this article:

Option Brief: Electronic Arts Inc. (NASDAQ:EA) is seeing an influx of bullish trading activity today, with around 18,000 calls exchanged so far. This is more than five times the equity's typical intraday call volume, and over eight times the number of puts that have crossed the tape.

Taking a closer look at the data, it appears that a block of 2,435 calls changed hands at the March 2014 25 strike for an ask price of $1.12 each -- suggesting they were bought -- while an equal number of calls simultaneously traded at the March 2014 29 strike for a bid price of $0.32 apiece, implying they were sold. Since today's volume has exceeded current open interest levels at both strikes, it's possible that one strategist constructed a bull call spread on EA for a net debit of $0.80 per pair of contracts.

In this scenario, the trader is counting on the video game guru to close at or above $29 by March options expiration, but not so far north that he would regret not simply making a "vanilla" call purchase. Breakeven in this case is $25.80, or the purchased strike plus the net debit. His maximum profit is limited to $3.20, or the difference between the strike prices, less the net debit. Conversely, his potential losses are capped at the net debit paid.

In reference to today's more traditional call activity, it's possible that some traders are purchasing out-of-the-money contracts to hedge their pessimistic positions, considering short interest makes up 8.1% of the stock's available float. Technically speaking, Electronic Arts Inc. (NASDAQ:EA) sports a year-to-date gain of almost 59%, but has lagged the broader S&P 500 Index (SPX) by more than 18 percentage points during the most recent three-month time frame. At last check, the shares were up 1.5% to perch at $23.07.


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.