Video game giant Electronic Arts reports earnings after the bell Tuesday, and options traders are betting that the stock’s disappointing start to 2021 will continue after the results cross the wire.
“The options market right now is implying a move of about 5.6% [in either direction], more than the 3.3% or so that the company has averaged over the last eight quarters,” Optimize Advisors CIO Michael Khouw said Monday on CNBC’s “Fast Money.”
The stock has vastly underperformed the broader market this year, down nearly 2% compared with 10% gains in the S&P 500 and 13% gains in the XLC Communication Services ETF, of which it is a constituent. That’s certainly not an inspiring performance, and Monday’s trading activity forecast even more losses.
“Put volume exceeded the average by more than seven times, and all of that was really the result of the June 140/130 put spread. Over 6,500 of those traded for about $3,” said Khouw.
Those contracts break even below the $137 level, or just about 3% lower than where EA closed Monday’s session. However, traders would see gains all the way down to the $130 level, which would represent a drop of 7.6%.
EA was trading slightly higher in Tuesday’s session.
