Video game design studio Electronic Arts (EA) dropped about 10 percent over the past year. One trader sees shares rebounding in the months ahead.
That’s based on the September $125 calls. With 178 days until expiration, 1,307 contracts traded compared to a prior open interest of 106, for a 12-fold rise in volume on the trade. The buyer of the calls paid $4.65 to make the bullish bet.
Shares recently traded for about $113, so the stock would need to rise $12, or about 11 percent, for the option to move in-the-money. EA has traded as high as $142.79 in the past year, so such a move is conceivable.
EA stock gapped lower earlier this year, and shares have been forming a base to move higher. And the company has been faring well operationally, thanks to ongoing demand for video games.
Action to take: Investors may like shares here near a 52-week low. At current prices, shares yield about 0.7 percent. While not a large yield, there’s room for future growth.
For traders, the September calls have enough time for the current fears in the market to play out and for shares to move higher. The trade can potentially deliver high double-digit returns during the next rally in EA shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.