One trader wants to devour GameStop using a three-part bearish
optionMONSTER's Depth Charge monitoring program detected the
purchase of 2,000 April 17 puts on the video-game retailer for
$0.67. He or she then sold 2,000 April 26 calls for $1.10 and
bought an equal number of April 28 calls for $0.71. Volume exceeded
open interest in all three strikes.
The trade resulted in a net cost of $0.28 and is similar to
shorting the stock, earning its maximum profits if GME drops below
$17. It also stands to lose money if the shares push above $26,
though the red ink will be capped at $2 thanks to the long calls at
the 28 strike.
The main difference between the position and simply shorting the
stock is that it will track movements in the shares less closely as
and expire worthless if they remain between $17 and $26. (See our
GME is down 0.79 percent to $22.54 and has fallen 10 percent in the
last month. It has faced major negativity by investors who think
that it will lose customers as game sales shift to the Internet.
Management trimmed its sales guidance following its earnings report
on Nov. 17 but maintained profit expectations.
Overall option volume in GameStop is more than twice the average
amount so far today, according to the Depth Charge.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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