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Mike Khouw Sees Unusual Options Activity In GameStop


CNBC Options Action's Mike Khow said on the show that he noticed unusually high options activity in GameStop Corp. (NYSE: GME) on Wednesday. Two times daily average volume was traded ahead of the earnings on Thursday and Khouw emphasized that traders were paying double the normal price of options.

The market is implying an 11 percent move on earnings and it usually moves 5 percent on this event. There was a huge trade in the weekly November 40 puts on Wednesday that caught Khouw's attention. Traders were paying $1 for this strike, which means that they are expecting the stock to trade below $39 or 11 percent lower on Friday expiration.

Khouw thinks that a better way of trading earnings in GameStop is by going further in time and he would be a seller of the near-dated options.


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