Stocks quoted in this article:
Online social gaming pioneer Zynga Inc (NASDAQ:ZNGA) has once again captured the attention of option bulls, who are gambling on a solid breakout in the very short term. Most active in Monday's trading was the weekly 10/4 4-strike call, where more than 8,000 contracts changed hands at a volume-weighted average price (VWAP) of $0.05. Implied volatility spiked almost 30 percentage points at the strike, 84% of the trades went off at the ask price, and the bulk of this volume translated as new open interest overnight. In short, it looks as though new long calls were opened at this weekly strike.
Breakeven for the option is $4.05, or the strike price plus the VWAP paid. This is a chip-shot above the stock's annual peak of $4.03, and has not been visited since July 2012. Zynga shares have been on a mad tear, however. The stock gained close to 30% in September and has solidly outperformed the S&P 500 Index (SPX) on a relative-strength basis during the last three months. Today, the shares have moved modestly higher to $3.68.
Still, this bullish strategy didn't work for weekly options buyers last week, and has about a 1-in-4 shot of success this time around. The option's delta stands at 0.24, giving it a 24% chance of being in the money at Friday's closing bell.
Meanwhile, these speculative bets are getting more expensive. During the last 10 trading days, the 30-day, at-the-money implied volatility measure for Zynga Inc (NASDAQ:ZNGA) has jumped from 50.7% to 67.4%, suggesting option premiums are getting pricier.
Option Briefs offer a concise look at recent notable trading activity. For more in-depth coverage of securities from an Expectational Analysis«
perspective, please visit our Trading Floor Blog section.