Shares of video game developer Electronic Arts (EA) have been somewhat rangebound in the past year. However, one trader is betting on a move higher in the coming months.
That’s based on the September $150 calls. With 113 days until expiration, 5,049 contracts traded hands compared to a prior open interest of 387, for a 13-fold rise in volume on the shares. The buyer of the calls paid $5.73 to get into the trade.
Shares last went for about $137, so they would need to rise $13, or about 9.5 percent, for the options to move in-the-money.
The strike price of $150 is right near the stock’s 52-week high. The buyer of the calls is likely betting that EA will try and sell itself to a larger company, akin to the sale of Activision Blizzard (ATVI) to Microsoft (MSFT).
Action to take: Shares trade at about 19 times forward earnings. Revenue is up 35 percent in the past year, and earnings are up a staggering 196 percent. That could make the company an attractive candidate for a larger firm to buy out, but the players in the space are few. Investors may like shares for a possible buyout and 0.6 percent dividend yield here.
For traders, the options are somewhat pricey, but could deliver mid-double-digit gains in the coming months on a rally in shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.