Options News
$EA bears win on the downside
Bearish option traders turned big profits in Electronic Arts today. On October 18, the eve of the company’s quarterly results, Investitute’s tracking systems found that 1,500 Weekly $104 puts expiring this Friday were purchased for $1.37 as part of a bearish roll with shares at $105.97. This was clearly a new position, as open interest in the strike […]
Bearish option traders turned big profits in Electronic Arts today.
On October 18, the eve of the company’s quarterly results, Investitute’s tracking systems found that 1,500 Weekly $104 puts expiring this Friday were purchased for $1.37 as part of a bearish roll with shares at $105.97. This was clearly a new position, as open interest in the strike was a mere 190 contracts before the activity appeared.
Those puts traded up to $5.40 this morning, nearly 4 times their purchase price. The stock fell 7% in the same time frame, underscoring how options can far outperform moves in their underlying shares.
Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.
EA was up 2.48% to $96.64 today as the rest of the market caught a reprieve from selling pressure, though still down on the week, month and year. The computer gaming company had a price target lowered by SunTrust this morning and reports its second quarter earnings next Tuesday before the market opens.