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Electronic Arts Inc. (EA) Traders Think Today's Rally is Short-Lived

EA put volume surges, despite positive November sales news

by 12/13/2013 2:10 PM
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Option Brief: Shares of Electronic Arts Inc. (NASDAQ:EA) are enjoying a 6.5% surge this afternoon, after NPD Group said three of the company's video games were among the ten top selling games domestically in November. However, the news hasn't kept put players at bay, as nearly 8,000 contracts have switched hands thus far -- about triple the intraday norm.

Garnering notable attention is the December 21.50 strike, where over 1,100 puts have crossed the tape -- 95% of them at the ask price, suggesting they were bought. Meanwhile, implied volatility has climbed 4 percentage points since the opening bell, hinting at the creation of new bearish bets.

If these puts were, in fact, bought to open, the traders are expecting EA -- currently perched at $22.33 -- to retreat back below the $21.50 mark by next Friday's close, when these front-month contracts expire. Failure to do so will result in a loss of the initial premium paid to purchase the puts.

Although the equity has had a rough go of it during the last few months -- falling 20.6% since tagging a five-year high of $28.13 back in August -- Electronic Arts Inc. (NASDAQ:EA) is still up almost 54% year-to-date. Nevertheless, the shares are poised to finish a third straight week below their 40-week moving average, despite today's rally.


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