9:15am (EST)

It looks like another busy day today…

Take-Two Interactive Software (TTWO, $9.86, up $0.45) has done well for us this week and made a stong push towards $10 in the afternoon yesterday. The stock has gained over 15% since last Thursday’s closing price of $8.40 but as you can see, $10 remains a tough hurdle.

The May 10 calls (TUOEB, $1.00, up $0.20) could have been picked up for 60 cents Monday morning and now stand at a 67% profit. The June 10 calls (TUOFB, $1.30, up $0.20) were going for 85 cents and are up over 50% from those entry prices.

That is the good news.

The bad news is there was a news release out last night that video games sales are falling. NPD Group came out after the bell and said sales of game software in the U.S. fell 17% for the month versus last year. The other story floating around is that sales of Take-Two’s new game, Grand Theft Auto China Wars, have not done as well as expected although Major League Baseball 2K9 hit the top 10 for the month.

The thing with China Wars is that it is an adult-themed game and it is currently only available for the Nintendo DS. Sales could improve because game critics love it but the news could be a negative for our plays when the market opens this morning.

If you have gains of 50% or more then this is a tough choice. I always say smart money wins over dumb money and this report is something I didn’t expect although I will from now on. Restaurant sales are measured on a monthly basis so I should have known some kind of gaming report was due out.

Anyway, I didn’t base this trade on how well games sales are going. This was more of a specualtive play on Take-Two getting another buyout offer. From who and when this could happen, I have no clue, but I think it could be within the next couple of months.

This news though could kill some of the momentum we had building so if this scares you, hopefully you can get out with a profit if you choose too. For those of you staying the course, there is plenty of time before these options expire but they could take a hit if the gaming stocks go south this morning.

Rick Rouse