Zynga Inc (ZNGA) Rally Puts Heat on Pre-Earnings Bears

Zynga Inc (ZNGA) is sitting higher amid buyout buzz in the video game sector

by Alex Eppstein

Published on Nov 3, 2015 at 10:55 AM

Zynga Inc (NASDAQ:ZNGA) is benefiting from a major M&A headline within the gaming industry, up 3.1% at $2.46. In the options pits, not everyone is happy with the uptick, as bearish betting has been pronounced heading into tonight's earnings report.

At the International Securities Exchange (ISE), Chicago Board Options Exhange (CBOE), and NASDAQ OMX PHLX (PHLX), ZNGA has amassed a 50-day put/call volume ratio of 0.34 -- registering in the high 85th percentile of its annual range. In other words, traders have been buying to open puts over calls at a faster-than-usual pace in recent months.

Skepticism is mounting outside of the options crowd, as well. Two-thirds of the analysts tracking ZNGA have handed out "hold" or worse recommendations. Also, while short interest has retreated in recent reporting periods, it would still take close to one week for these bears to cover their short positions, at the stock's typical trading levels.

This shouldn't come as too much of a surprise. On the charts, ZNGA has been far from impressive, losing 7.5% in 2015. Looking more closely, the shares have struggled to hurdle the $2.50 area for the past month, and the descending 60-day moving average could reinforce technical resistance around there.

As alluded to, Zynga Inc (NASDAQ:ZNGA) will tell all after the closing bell, and the options market is pricing in a sharp 9.3% post-event move, based on near-term at-the-money straddle data. Over the past eight quarters, the stock has typically swung 6% in the session following quarterly reports.

A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!


  
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.
Planet Fitness Stock Lifted Amid Re-Opening Optimism
Planet Fitness reopened around 800 facilities in North America
Coffee Stock Drops Despite Cost-Cutting Initiatives
Starbucks asked employees to further limit working hours or take unpaid leave
The Big Bankruptcy You Should Be Afraid Of
Porter Stansberry is making a concerning prediction.