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Option Brief: In the wake of an early morning price-target hike, call players took the lead in Zynga Inc's (NASDAQ:ZNGA) options pits yesterday. By the numbers, roughly 25,000 calls changed hands, compared to fewer than 7,000 puts. The most active strike was the March 6 call, and it appears a number of speculators either bet on a move to annual-high territory by week's end, or protected their shorted shares against one.
Nearly all of the 7,284 contracts that traded at this out-of-the-money strike did so on the ask side. Implied volatility soared 19.6 percentage points, and open interest added 5,475 new positions overnight, making it safe to assume a fresh batch of bullish bets was initiated. Based on current trading levels, ZNGA needs to rise roughly 12.8% over the next three-plus sessions in order for the call to be in the money.
Considering nearly 7% of ZNGA's float is sold short, a portion of yesterday's activity could be the result of short sellers hedging against any additional upside. Regardless of the motive, even if the shares are south of the $6 mark at Friday's close, the most the call buyers stand to lose is the initial premium paid.
On the charts, shareholders should be pleased with the stock's performance in recent months. In addition to sporting a 40% year-to-date advance, the equity has outperformed the broader S&P 500 Index (SPX) by nearly 55 percentage points over the past 40 sessions. What's more, Zynga Inc (NASDAQ:ZNGA) tagged a new annual high of $5.89 one week ago, but was last seen lingering near $5.32.