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Option Bears Forecast Additional Losses for GameStop Corp. (GME)

Put buyers expect not-so-merry holiday sales data from GameStop Corp.

by 12/30/2013 10:57 AM
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Option Brief: Bearish betting ramped up on GameStop Corp. (NYSE:GME) on Friday, with 8,651 puts crossing the tape -- more than double the daily norm. By comparison, just 1,785 calls changed hands. Digging deeper, it looks as though one group of speculators is counting on the stock to extend last week's losses over the next few weeks.

At the helm was the January 2014 46 strike, where 3,212 puts were exchanged -- 96% of them at the ask price, implying they were bought. What's more, this option saw a rise in open interest over the weekend -- 2,773 contracts, to be exact -- indicating that a large portion of the volume was comprised of newly added positions.

In other words, Friday's put players are wagering that GME will retreat south of $46 by front-month expiration. This denotes a drop of 4.9% from the stock's present perch at $48.36. The delta for this put sits at negative 0.30, implying the option has a 30% chance of being in the money at the close on Jan. 17.

Although GME has nearly doubled in value during the past year, the shares suffered a notable setback in mid-November, shedding about 15% over the course of five sessions. Part of that decline was due to the company's weaker-than-expected fourth-quarter guidance. Meanwhile, GameStop Corp. (NYSE:GME) is on tap to release its 2013 holiday sales figures on Tuesday, Jan. 14 -- just a few days before January-dated options expire. As such, it's possible that the retailer's lackluster outlook may have fueled Friday's bearish bets.


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