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Option Brief: Put players set their sights on GameStop Corp. (NYSE:GME) yesterday, as roughly 15,000 contracts crossed the tape during the course of the session. This was more than six times the daily norm, and almost double the number of calls exchanged. Digging deeper into the data, its looks as though one speculator is counting on the stock to backpedal by week's end -- a time frame that encompasses GME's upcoming quarterly earnings report.
More specifically, the weekly 11/22 54 strike saw 5,917 puts change hands on Monday, including a large block of 5,439 contracts. This block traded near the ask price -- pointing to buyer-fueled activity -- while open interest surged by 5,840 contracts overnight, confirming the initiation of new positions. In this scenario, the put buyer is betting that GME -- currently docked at $54.35 -- will fall south of the $54 level by this Friday's closing bell, when these weekly puts expire.
GameStop Corp. has been a technical standout in 2013, considering the shares have more than doubled in value so far this year. As such, it's possible that some of yesterday's put activity could be attributed to shareholders hedging in case of an earnings-induced pullback.
Specifically, the video game retailer is on deck to reveal third-quarter earnings before the market opens this Thursday, and has bested or matched consensus bottom-line estimates in each of the past seven quarters. In fact, following GameStop Corp.'s (NYSE:GME) most recent turn in the earnings confessional, the stock gained about 9% in the session following its results.