Calls play for upside in Take-Two
David Russell | firstname.lastname@example.org
optionMONSTER's Heat Seeker monitoring show that a trader sold 7,500 June 16 puts for $0.875 and bought an equal number of June 16 calls for $1. Volume was more than 7 times the previous open interest at each strike, indicating that new money was put to work.
The position cost just $0.125 and is highly leveraged to gains in shares of the company, which reports fourth-quarter earnings this afternoon. The last release in March beat expectations on the top and bottom lines, propelling the stock higher.
If TTWO closes below $16 on expiration, the investor will face the obligation to buy stock at that level, and they'll be losing money. But above that level the trader stands to earn huge profits, with a gain of 700 percent in the calls if the stock moves only to $17. (See our Education section for more on the dynamics of put selling and call buying.)
TTWO rose 2.81 percent to $16.44 on Friday and has more than doubled since last August as years of negativity abate in the video-game industry. The stock struggled at $16 in March and April but found support above that level last week. Some chart watchers could view that price action as bullish.
Total option volume was 70 times greater than average in the session, according to the Heat Seeker.