Call Options Or Put Options On Glu Mobile (GLUU)?

| July 11, 2014 | 0 Comments

GLUU OptionsGlu Mobile (GLUU) develops games for smartphones and tablets. The company typically uses a free-to-play model with optional in-app purchases used to generate revenues.

GLUU shares are currently trading at $5.83. The stock is now trading 3% higher than the previous 52-week high of $5.68 and is 178% above the 52-week low of $2.10.

Is this an opportunity to buy call options on GLUU because of the success of one of its games? Or should you buy put options on GLUU because the stock is overbought?

The bulls make a convincing argument…

Glu Mobile recently launched a game that’s been wildly successful. Believe it or not, the game is Kim Kardashian’s video game, Kim Kardashian: Hollywood.

The Kardashian game has hit #2 on the iOS top sellers list. Analysts believe the game could generate as much as $200 million this year. That’s clearly a huge haul for a company making $125 million over the last year.

Sometimes, all it takes is one game to really jolt a mobile game company like GLUU to sustained success. Just think of what Angry Birds has done for Rovio for example. Once you hit a big winner, the company has a lot more cash to play with.

But the bears have a compelling case as well…

As well as GLUU’s Kardashian game is doing now, it’s impossible to tell if the success will continue. Games like this can lose popularity overnight. The mobile gaming crowd is fickle.

Furthermore, who’s to say GLUU could even repeat the success it’s had with this game. One big hit doesn’t guarantee the company’s success. GLUU hasn’t had any huge success stories like this before.

Finally, the company isn’t profitable. I’d still like to see if the company can turn its big hit into a profit before I buy into the hype behind the stock.

So is it time to be bullish on GLUU because of the Kardashian game, or should you take a bearish position because the stock has already made its run?

If you think the bulls are right, take a look at buying the GLUU August $5.50 calls for around $0.75.

If you think the bears are right, take a look at buying the GLUU August $5.50 puts for around $0.40.

Yours in Profit,

Gordon Lewis

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.