GME – Gamestop Corp. – Shares of the video game retailer plunged 9.5% to touch an intraday low of $19.80 this morning after the world’s largest consumer electronics retailer, Best Buy Co., said it plans to allow customers to trade in used video games in more than 1,000 U.S. stores. BBY’s announcement sent GME shares tumbling on sentiment the trade-ins policy will cut into Gamestop Corp.’s sales of video games and gaming devices. The news spurred bearish options traders to action. Investors anticipating continue bearish movement in GME’s share price purchased at least 1,800 puts at the June $20 strike for an average premium of $0.27 apiece. Put buyers at this strike price profit if Gamestop’s shares trade below the average breakeven price of $19.73 ahead of expiration day on Friday. Buying interest spread to the lower June $19 strike where 1,200 puts were picked up for an average premium of $0.15 each. GME’s shares must fall another 4.8% from today’s low of $19.80 in order for June $19 strike put buyers to make money beneath the average breakeven point of $18.85. The overall reading of options implied volatility on the video game retailer shot up 12.4% to 45.33% by 11:42 am (ET).
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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