Options Traders Stay Hopeful Ahead of Activision Blizzard Earnings

ATVI call options have been popular ahead of earnings

Nov 1, 2017 at 1:29 PM
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Video game stocks are in the spotlight this week, with Electronic Arts Inc. (NASDAQ:EA) trading lower after the company issued a disappointing holiday-quarter revenue forecast. Tomorrow, traders will digest third-quarter earnings from sector peer Activision Blizzard, Inc. (NASDAQ:ATVI) after the close. Here's a closer look at ATVI stock ahead of earnings, and how options traders have been positioning themselves on the video game shares.

Activision Blizzard's Earnings History is Mixed

Activision Blizzard stock has surged on the charts this year, adding roughly 80% in value. The shares touched a record high of $66.58 on Aug. 31, and were last seen trading within a chip-shot of this peak, at $65.02. The video game stock could reach another record high by the end of the week, too, if tomorrow's earnings report goes well.   

Historically, ATVI has had a mixed earnings history. The shares moved higher the day after four of the company's last eight reports, with an average one-day, post-earnings move of 5.9%, regardless of the direction. After earnings in February, the stock skyrocketed 18.9% in one day. The day after its most recent report in August, however, the equity dropped 3.1%. 

This time around, the options market is pricing in a bigger-than-usual one-day swing of 9.2%, per at-the-money implied volatility data. A move of this nature would send the security up to record highs near $71, or down to the $59 neighborhood.

Options Traders Are Leaning Bullishly

Ahead of the earnings event, options traders have favored calls over puts. The security's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and the NASDAQ OMX PHLX (PHLX) of 2.04 -- in the 63rd annual percentile -- tells us that options players have bought to open two ATVI calls for every put during the past two weeks.

So far today, ATVI has seen roughly 11,000 calls change hands -- 1.6 times the norm, and more than double the number of puts exchanged. One of the most active options today is the weekly 11/3 64-strike call, and buyers of the call expect Activision stock to extend its climb above $64 through Friday's close, when the options expire.


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