Unusual Options Activity In Activision Blizzard $ATVI

| July 10, 2015

Unusual Options Activity In Activision Blizzard $ATVI 

As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week…

Activision Blizzard $ATVI is a popular video game developer.  The company has a market cap of over $18 billion with sales over $4.5 billion per year.  For a good description of the company, follow the link.

$ATVI is trading at $25.10, up 24% for the year.  That’s just 4% below the 52-week high and 43% from the 52-week low.

So what does unusual options activity in ATVI tell us?

There haven’t been as many large, unusual options trades this week as traders seem to be in wait and see mode regarding Greece.  It’s not unexpected to see individual equity option activity slow down when volatility rises.  (However, I do expect to see more index/ETF option activity overall.)

So, it makes it even more interesting to see what block trades in equity options occur during periods of uncertainty.  While the trade I’m about to describe isn’t huge in volume, it’s significant because of the timing.  In other words, someone must really like ATVI’s future for them to be this bullish in a high volatility environment.

Here’s the deal…

This week, a trader bought a chunk of calls on ATVI.  Keep in mind, a call option makes money when the underlying stock goes up.

In more detail, a trader purchased 3,300 November 26 ATVI calls for $1.23.  The total cash outlay for the calls was over $405,000, which is also the max loss.  Breakeven point for the trade is $27.23.

This trade may look like a basic bullish trade on the surface.  The company had excellent earnings last May and is doing very well in the mobile game space this summer.  Upcoming earnings are August 4th, so this could simply be a bullish bet on those results.

But why November calls then?  Why not save money and buy August or September options?

That’s what makes this trade more interesting.  I believe the volatility in the overall market (due to Greece and other events) is causing this trader to pay up for extra time.  Just in case the market sells off, he or she wants another couple of months for ATVI to recover.

Here’s the chart of $ATVI:

unusual option activity, a chart of $ATVI

 

As you can see, ATVI has had a solid year so far.  The share price is sitting right at the important 50-day moving average, which seems to have basically held up as support during the recent market downturn.

The call trade suggests $ATVI is going to keep up its success this year.  There’s a good chance, the trader expects August earnings to beat expectations.  However, there’s a strong possibility the extra time value purchased is a type of hedge against current uncertainty.

More Options Trading Ideas…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

Yours in Profit,

Gordon Lewis
Options Trading Research

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

Tags: , , , , ,

Category: Options Trading

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

Comments are closed.