GameStop faces protective strategy

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GameStop has been hovering, and one investor wants protection ahead of the company's earnings report.

optionMONSTER's Depth Charge tracking system detected the purchase of about 2,000 April 24 puts for $1.39 and the sale of a matching number of April 21 puts for $0.31 on Friday. Volume was more than twice open interest in both strikes.

The trade cost $1.08 and will earn a maximum profit of 178 percent if GME closes at or below $21 on expiration. That's roughly the same price where it found support for most of August, which could make some chart watchers think that a drop won't violate that level.

GME fell 1.28 percent to $23.90 on Friday and has spent most of the last year fluctuating on either side of $24. Recently it seems to have been consolidating below its 200-day moving average, potentially suggesting that it's getting ready to push lower.

Investors are generally negative on the company, doubting its growth potential as videogames increasingly move online and away from retail stores. All of its recent reports have shown weakness in its business, and Friday's option trade may be betting that the shares will fall before the next earnings release on March 22.

Almost 9,000 GME contracts traded in the session, more than triple its daily average. Puts accounted for two-thirds of the activity, 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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: GME

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