Electronic Arts Inc. (EA) is a developer, publisher and distributor of video game software to be played on a variety of devices including consoles, personal computers and mobile devices. The company’s stock is currently trading around $24.45 in 52 week range of $11.90-$28.13. The stock has been outperforming the broader market this year posting gains of over 68%. The stock is also up over 105% in the past 12 months. EA is set to report their most recent quarterly earnings after the close today with analysts expecting EPS of $0.12 on revenues of $979 million. EA has been a strong earnings day performer over the past 6 quarters. The stock has rallied 5 of the past 6 earnings announcements with an average move of 7.4%. Although shares of EA are currently trading below the cloud we believe this strong historical earnings performance gives us a good opportunity to get long EA ahead of earnings. Currently the options market is implying a move of $2.00 higher or lower by November 1st expiration. Using this implied move we can calculate an upside target of $26.50 for Friday’s close. Using this target we can now set up a trade.
Trade: Buying the EA Nov 1st Weekly 25.5-26.5 Call Spread for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $25.75
