Market Overview

Mike Khouw's Electronic Arts Trade


Mike Khouw spoke on CNBC's "Options Action" about a contrarian trade in Electronic Arts Inc. (NASDAQ: EA) ahead of the earnings report. The stock has been struggling lately and it hasn't performed well on earnings historically. The company is scheduled to report earnings May 7 and the options market is implying an 8.5-percent move in either direction.

See Also: 'Candy Crush' Boosts Activision Blizzard, But The Market's Not Playing Along

The implied move tells us that the short-dated options are more expensive than the long-term options, so Khouw wants to sell the May 100 call for $1.90 and buy the June 100 call for $3.50. The total cost of the trade is $1.60 and if the stock closes below $100 at the May expiration, Khouw is going to have the June 100 call, which breaks even at $101.60 at the June expiration.

Posted-In: CNBC Mike Khouw Options ActionOptions Markets Media


Related Articles (EA)

View Comments and Join the Discussion!
Lightning Fast
Market News Service
$199 Free 14 Day Trial

Alibaba, Olin, Qualcomm: 'Fast Money' Picks For May 6

Dan Nathan's Disney Options Trade