Update: EA Call Calendar

by Dan April 16, 2020 2:51 pm • Trade Updates

With April expiration upon us on tomorrow’s close I wanted to update a trade idea in Electronic arts that I detailed two weeks ago::

March 31, 2020: Electronic Arts (EA) – eSportsCenter

If I were inclined to leg into a bullish position, with the defined risk I might consider a call calendar spread, selling a short-dated out of the money call, and buying a longer-dated out of the money call at the same strike… for instance…

-Sell to open 1 April 105 call at $1.50

-Buy to open 1 Sept 105 call for $8.50

EA is trading at $117.50 as I write. I got the direction too right, the timing obviously very wrong as the stock is trading at a new 52-week high:


So what to do now? There is not really much else to do aside from closing this position as the stock got away from the 105 strike so quicky. It is worth noting that on Monday the stock was at $105, after it had already rallied a bit the prior week. I wanted to keep an eye on it this week but it just got away.

The only thing to now is close the portion for what you would have paid a couple weeks ago when the stock was $105. The trade is so far in the money both legs are trading like stock.

Action Closing Trade: EA ($117.50) The short April 105 call should be bought to cover for $12.50 and the Sept 105 Call sold to close at $19.50… $7 credit.

This is a great example of how to outsmart yourself trading options. Other investors had come around to my bullish thesis if I had just bought the stock, or a call, I would have a very nice short term gain. But I think it is also important to recognize that a 17% move in two weeks in a large-cap stock is not a usual occurrence. While the trade is not a winner, it is also not a loser either, and it sure beats a sharp stick in the eye.