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Zynga Inc (NASDAQ:ZNGA) option traders from both sides of the aisle targeted the $3.50 mark yesterday. Put players honed in on the August 3.50 strike, where 18,331 contracts traded, including one large block of 15,000. With open interest at this strike dropping by nearly 13,100 contracts overnight -- and ZNGA lingering near $2.92 -- it seems these deep in-the-money puts were closed out ahead of next week's expiration.
Call players, meanwhile, once again turned their attention to the March 3.50 strike, where 5,135 contracts changed hands for a volume-weighted average price (VWAP) of $0.30. The majority of the calls traded off the ask price, and open interest soared overnight, making it safe to assume that a number of positions were bought to open.
By purchasing the out-of-the-money calls, speculators expect Zynga to tackle the $3.50 mark through March expiration. More specifically, they will begin to profit with each step above $3.80 (strike plus VWAP) ZNGA takes over the next seven-plus months. Delta for the call is docked at 0.41, or 41%, suggesting a roughly 2-in-5 chance the option will make it into profitable territory during the course of its lifetime.
From a wider sentiment standpoint, calls have been preferred over puts in recent weeks. Throughout the past 20 sessions, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 150,716 calls on ZNGA, compared to 49,158 puts. As such, the stock sports a call-skewed 20-day ISE/CBOE/PHLX call/put volume ratio of 3.07.
On the charts, Zynga Inc (NASDAQ:ZNGA) has experienced some wild price swings in 2013, which have translated into a year-to-date advance of 22.9%. However, a late-July slide on the heels of a management shake-up sent the stock tumbling below its 10-day moving average, and, more recently, the equity has run into technical resistance at its 200-day moving average. Despite trading 2.4% higher in today's session, these two moving averages are putting a cap on any additional upside.