Schaeffer's Trading Floor Blog

Opinions Divided Over Take-Two Interactive Software, Inc. (TTWO)

Call buyers have taken a liking to TTWO -- but so have shorts

by 2/6/2014 2:39 PM
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Traders of Take-Two Interactive Software, Inc. (NASDAQ:TTWO) options have strongly preferred calls to puts of late. During the past five sessions at the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), 32,387 calls have crossed the tape versus 1,664 puts. The result is a brow-raising call/put volume ratio of 19.46.

Expanding the scope to 10 weeks -- and including data from the NASDAQ OMX PHLX (PHLX) -- yields a similarly top-heavy ratio. Specifically, TTWO's 50-day ISE/CBOE/PHLX call/put volume ratio checks in at 7.89, with nearly eight calls bought to open for each put during the last 10 weeks. What's more, this ratio is just 6 percentage points from an annual acme, which tells us that calls have been scooped up over puts at a near-extreme pace in recent months.

Not all of this call-purchasing action may be bullish, however, based on Take-Two's high levels of short interest. Specifically, over 12% of the video game maker's shares are sold short. Consequently, some of the call buyers may actually be shorts attempting to hedge their bearish bets.

Meanwhile, TTWO's Schaeffer's put/call open interest ratio (SOIR) registers at 0.60. Although this means (on an absolute basis) that call open interest outweighs put open interest among options expiring in the next three months, the SOIR is higher than 80% of similar readings from the last 12 months -- suggesting a pronounced preference for puts over calls among short-term traders, relatively speaking.

Outside of options land, the brokerage bunch is divided over Take-Two Interactive. Half of the 14 covering analysts rate the stock a "strong buy," while the other half give it a tepid "hold" evaluation.

On the charts, the shares are up a nickel from yesterday at $18.05, bringing their 52-week gain to about 25%. Taking a step back, Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has outpaced the broader S&P 500 Index (SPX) by 10 percentage points during the last two months. However, the equity dropped 9.7% on Tuesday after issuing a disappointing current-quarter forecast.

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