Videogame Retailer Sees Upside Options Activity

Monday, 19 Apr 2010 | 7:57 AM ET

GameStop is attracting upside option activity following some notable endorsements in recent days.

Traders were focused on the May 27 strike, where 6,110 calls changed hands early Friday in a strong buying pattern for an average of $0.71, according to OptionMonster's real-time systems. Previous open interest was only 252 contracts at the strike, which has seen an average call volume of just 12 a day for the last month.

The videogame retailer closed Friday at $24.81, up 1.6 percent on the session. Shares have been off to the races since rebounding in March as videogame sales grew 6 percent across the industry, reversing back-to-back months of double-digit losses.

BB&T Capital Markets, which had initiated coverage of GameStop only last month with a "hold" rating, bumped it to a "buy" with a price target of $32 on Friday. In addition, Forbes identified it as a company with strong potential earlier this month.

For the calls purchased Friday to turn a profit, the stock needs to gain roughly 12 percent by expiration in May. Overall calls in the name outpaced puts by more than 3 to 1 in the session.


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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com.



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