Volatile EA Stock Rallies Above Technical Ceiling

Bulls should cheer the equity's rise above the $93 mark

by Josh Selway

Published on Feb 8, 2019 at 2:00 PM
Updated on Feb 8, 2019 at 2:18 PM

The shares of Electronic Arts Inc. (NASDAQ:EA) are having a huge session thanks to positive buzz surrounding the company's new battle royale game "Apex Legends," which it says already has 10 million players. EA shares were last seen up 13.6% at $95.51, breaking through a tough ceiling from recent weeks near the $93 level and more than making up for their earnings pullback. The game's success, and subsequent stock move, likely comes as a breath of fresh air for the company, after it admitted in its earnings call that not including a battle royale mode for its latest "Battlefield" game was a mistake. In the meantime, options volume is soaring.

ea stock chart feb 8

A number of data points on EA options activity are nearing extreme levels today. First of all, overall options volume is running in the 99th annual percentile, and puts and calls are both seeing unusual trading volumes. This increased demand as elevated the security's 30-day at-the-money implied volatility to 45.4%, only six percentage points from a 12-month high.

Looking closer, the March series is dominating the action today. The 100, 115, 130, and 140 calls from the series are seeing the most activity, and new positions are being initiated at the latter two, for sure. The March 100 and 115 calls were two of the most populated positions coming into today on Electronic Arts.

No matter how you slice it, it's been a volatile run for the video game concern. There's the Schaeffer's Volatility Scorecard (SVS) of 85, revealing a tendency to make moves bigger than the options market was pricing in over the last year. Similarly, the shares' 120-day historical volatility of 42.7% is an annual high.

Those who've been holding EA stock for some time now likely need a much larger rally to make up for the losses felt in recent months, since the equity's record high from July stands up at $151.26. Meanwhile, BMO at least wasn't too impressed with the "Apex Legends" numbers, this morning cutting its price target on the stock to $96 from $110.

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