Stocks quoted in this article:
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) got hit with a downgrade this morning from Pacific Crest, which lowered its outlook on the stock to "sector perform" from "outperform." The brokerage firm expressed concern that bullishness toward the video-game producer has become overdone in the run up to Grand Theft Auto V's Sept. 17 release date -- a day before an annual shareholder meeting -- and also cited TTWO's "empty pipeline" as a major liability going forward. Accordingly, the shares have surrendered nearly 4% to $17.43.
Nevertheless, call volume has swollen to more than three times its daily average, and nine times the number of puts traded. Most notable is the September 17 call, which has seen 4,175 contracts -- including a block of 3,387 -- cross the tape at a volume-weighted average price (VWAP) of $0.53. Because 86% of the calls have traded at the ask price and implied volatility has surged, it's likely today's speculators bought the contracts to open, expecting expecting TTWO to rebound from today's swoon.
Specifically, the in-the-money call buyers are banking on the shares of Take-Two Interactive Software, Inc. (NASDAQ:TTWO) to make up at least a little bit of lost ground prior to front-month options expiration on Sept. 20. The breakeven point for the trade is $17.53 -- or the strike price plus the VWAP -- which is less than 1% away from the security's current perch. Conversely, in the worst-case scenario, the shares would fall below the strike price and expire worthless, costing the bulls the entire premium paid to enter their long call positions.
Option Briefs offer a concise look at recent notable trading activity. For more in-depth coverage of securities from an Expectational Analysisģ
perspective, please visit our Trading Floor Blog section.