Huge Call Action in Electronic Arts

Nov.23.10 | About: Electronic Arts (EA)

By Chris McKhann

Electronic Arts (ERTS) is pushing back toward recent lows, but the volume is in a big call spread.
ERTS

ERTS is down 2.92 percent to $14.96 today after touching $18 in early October and mounting a run to $16.50 two weeks ago. The videogame company's shares are now back against resistance from August and headed toward a multi-year low near $14 that was hit in early July.

Less than halfway through today's session some 120,000 contracts have already changed hands, dwarfing the average daily option volume of 3,500. Despite the fall, fewer than 1,300 of those were puts, as almost all of the volume was tied up in one call spread.

A trader bought 38,200 of the March 20 calls for $0.25 at more than twice the open interest at that strike. In the next few seconds, 75,000 January 20 calls were sold for $0.07 against open interest of 90,053. That strike had by far the highest open interest for ERTS.

This is likely just a roll from those January calls, which are now mostly worthless, to those in March that are further out of the money but have twice the delta and more time to produce.

Disclosure: No position