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Zynga Inc (ZNGA) Trader Gets Skittish Ahead of Earnings

One Zynga Inc (ZNGA) speculator may have closed out his short put position

by 7/11/2014 2:06 PM
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Zynga Inc (NASDAQ:ZNGA) puts are trading at nearly four times the usual intraday pace this afternoon, and short-term contracts are especially in demand -- as evidenced by the stock's 30-day at-the-money implied volatility (IV), which has edged 2.1% higher to 67.3%. Far and away the most active strike is the August 2.50 put, where almost 10,800 contracts are on the tape.

Digging deeper, the majority of the volume at the aforementioned strike transpired when a sweep of 6,146 contracts traded just before noon ET. These puts were exchanged at the ask price of $0.05 apiece, and data from the International Securities Exchange (ISE) suggests the sweep may have been bought to close.

It's worth noting that a block of 7,000 August 2.50 puts appear to have been sold to open on June 5, at the bid price of $0.16. Therefore, in light of ZNGA's 2.5% advance this afternoon to trade at $3.19 -- as well as the company's upcoming second-quarter earnings report, tentatively scheduled for the week of July 21 -- it's possible last month's block trader is closing out a portion of his neutral-to-bullish position in order to lock in a small profit ahead of earnings.

On the charts, Zynga Inc (NASDAQ:ZNGA) has made significant headway since touching a year-to-date low of $2.73 -- also on June 5. In fact, with today's move higher, the stock has moved back atop its 10- and 20-day moving averages, which could act as layers of support going forward.


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