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International Game Technology (NYSE:IGT) is charging up the charts today, up 5.7% amid a rallying gaming sector to wink at $20.65, after earlier tagging a three-year high of $20.71. The price action has prompted a flurry of options activity, too -- particularly on the call side, where volume is 41 times its average intraday amount. The most popular strike so far is the September 20 call, where more than 3,200 contracts have traded, 97% at the ask price. What's more, because volume outstrips open interest at the strike, and implied volatility is up 9.9 percentage points on the option, it's likely new bullish positions were created.
The IGT calls were bought to open for a volume-weighted average price (VWAP) of $0.73. Consequently, the breakeven price for the trade -- $20.73 (strike price plus VWAP) -- is just a stone's throw away from the stock's current price. Past that point, the speculators' profit will increase as the underlying advances. If, however, the underlying falls beneath the strike during the next 8.5 sessions leading up to front-month expiration, the most the call buyers can lose is the premium paid.
Based on IGT's Schaeffer's Volatility Index (SVI) of 33% -- which is lower than 87% of comparable readings recorded during the past 52 weeks -- the premium paid is a relatively small sum. Nonetheless, current data shows it is rising. The stock's 30-day, at-the-money implied volatility has gained 7.1 percentage points, or 22.2%, since yesterday's close, to sit at 39.2%. Contributing to this surge is the shares' rise on the charts. It is also notable that IGT's ex-dividend date is set for exactly one week from today.
Taking a step back, we notice International Game Technology's (NYSE:IGT) technical tenacity is by no means a one-day phenomenon. The shares have shot up over 67% on a year-over-year basis, and on a relative-strength basis, have outpaced the broader S&P 500 Index (SPX) by 10 percentage points during the most recent three-month time frame.
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