Options Trading News

February 11, 2013  Mon 5:14 AM CT

Sentiment has been improving in the video-game industry, and the bulls are shopping at GameStop.

optionMONSTER's Heat Seeker system detected the purchase of about 12,000 March 30 calls against no previous open interest. Those contracts lock in the price where investors can buy stock in the video-game retailer, and they can generate some nice leverage if shares push higher.

That occurred on Friday because the initial blocks of calls priced for $0.20 when GME stood at $25.79. The stock inched higher to $26.22 by the last option trade, an increase of less than 2 percent, but those calls doubled to $0.40 in that same period. (See our Education section)

GME is a name that the bears have loved to hate: Short interest stands near 50 percent of the float while the stock trades for less than 10 times earnings--with no debt and a 4 percent dividend yield to boot. But the video-game industry is coming back to life, judging by recent moves in Electronic Arts, Take-Two Interactive Software, and Activision Blizzard noted on researchLAB.

Total option volume in GME was quadruple its daily average, with calls outnumbering puts by 25 to 1. Shares rose 2.56 percent on Friday to finish the session at $26.06.

(A version of this post appeared on InsideOptions Pro on Friday.)
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I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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