Electronic Arts Call Buyers Unfazed By 'Star Wars Battlefront' Backlash

Options traders are heavily call-skewed toward EA stock

Managing Editor
Nov 21, 2017 at 12:58 PM
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While "Grand Theft Auto" parent Take-Two Interactive Software, Inc. (NASDAQ:TTWO) continues to bask in its earnings victory earlier this month, sector peer Electronic Arts Inc. (NASDAQ:EA) has found itself in hot water, after extensive backlash related to micro payments in its latest high-profile video game "Star Wars: Battlefront II". Below, we will check in with EA to see how the video game stock has been faring in the wake of this negative press, and how options traders have reacted.

Taking a quick step back, Electronic Arts stock touched a record high of $122.79 on Aug. 31. And while shares are still boasting an impressive year-to-date gain of 37%, they've been notching a series of lower highs since hitting this notable milestone. Last Friday, in fact, the equity fell 2.4% after the latest installment of "Star Wars Battlefront" was released -- sinking below their 180-day moving average in the process. Even though EA shares are up 0.3% today to trade at $107.91, the stock is on track to log its first back-to-back closes south of this trendline since last December. 

Nevertheless, analysts remain convinced of EA's long-term potential. Of the 19 brokerages covering the gaming stock, 15 rate the shares a "strong buy" or "buy," with zero "sells." Furthermore, analysts at KeyBanc Capital Markets assert that gamers are overreacting to the Battlefront controversy, and view it as "an opportunity to add to Electronic Arts ... positions."

In the options pits, calls have been popular, with call open interest of 128,854 contracts docked in the 99th annual percentile. Echoing this, EA stock has a Schaeffer's put/call open interest ratio (SOIR) of 0.58, ranking 2 percentage points from an annual low, meaning options traders targeting contracts expiring within three months are unusually call-skewed at the moment.

Digging deeper, the February 110 call has seen the biggest rise in open interest during the past 10 days, 15,633 contracts added. Buy-to-open activity is suspected, according to Trade-Alert. This indicates options traders are expecting EA stock to resume its quest for record highs in the coming months.

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