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New Portfolio Position - Gamestop (NYSE:GME) Projected Profit = $175

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GME - GameStop $24.61

GameStop (NYSE:GME) is a specialty retailer of video game and personal computer entertainment software in the United States. The company offers an assortment of new and used video game hardware, video game software and accessories, PC entertainment software and related products, including action figures, trading cards and strategy guides. Through over 1,500 stores in the United States, Puerto Rico, Ireland and Guam, the company carries a large, constantly changing selection of electronic game merchandise and it also operates www.gamestop.com and publishes Game Informer, a multi-platform video game magazine, with over 1,500,000 subscribers.

Shares of GME surged earlier this month after the company agreed to acquire rival video game retailer Electronics Boutique (NASDAQ:ELBO) for $1.44 billion, in order to boost its international presence and compete against well-known retailers. GameStop will pay $38.15 in cash and exchange 0.78795 of its shares for each share of ELBO and the company says the acquisition will begin adding to earnings in the second half of 2005. Apparently, investors are in favor of the deal as GME has rallied nearly 20% since the announcement and the technical indications suggest a neutral to bullish trend in the near-term. Of course, the merger is subject to approval by shareholders and antitrust regulators, but everything points to a successful consummation and traders who agree with a positive outlook for the (combined) company should consider this position.

Fundamentals Chart Earnings Dates Analyst Ratings

Suggested (Bullish) Option Position:

Sell Put MAY 22.50 GME-QX

Target Price = $0.35 Open Interest = 400
Potential Profit (5 contracts @ $0.35) = $175
Initial Margin (5 contracts) = $4,015
Return on Investment (max) = 5.7%
Cost Basis in Stock = $22.15
Days to Expiration = 20

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