2 Surging Video Game Stocks With Options on Sale

Both EA and ATVI received bullish analyst attention today, too

by Patrick Martin

Published on May 16, 2018 at 12:19 PM

Video game stocks Electronic Arts Inc. (NASDAQ:EA) and Activision Blizzard, Inc. (NASDAQ:ATVI) were the subject of bullish brokerage notes today, and are trading higher as a result. Traders looking to take advantage of the price action may want to do so with options, which are attractively priced on both stocks at the moment. 

Electronic Arts Stock Rallies Off Double-Barreled Support

At last check, Electronic Arts stock was up 0.4% at $130.40, after the regulatory filings revealed Third Point and Jana Partners took stakes in EA. In addition, SunTrust Robinson issued a price-target hike to $140 from $135, which sits north of last Friday's record high of $134.58. Overall, the shares have added 24% in 2018, with the recent pullback contained by both the 160- and 200-day moving averages.

EA Daily Stock Chart

The bullish analyst attention is nothing new for EA. Exactly 80% of brokerages covering the security rate it a "buy" or "strong buy," with not a single "sell" on the books. Plus, the stock's average 12-month price-target of $143.24 is a 10% premium to EA's current perch. 

It's also worth noting that EA stock currently sports a Schaeffer's Volatility Index (SVI) of 24%, which ranks in the 16th percentile of its annual range. This suggests that near-term options are pricing in relatively low volatility expectations at the moment, which could help maximize the benefit of leverage for premium buyers.

Morgan Stanley Boosts Its ATVI Stock Bull Case to $100

Activision Blizzard stock also received bullish analyst attention this morning, with Morgan Stanley raising its bull case to $100 -- citing growing popularity of the company's Overwatch League. At last check, ATVI stock was up 0.7% to trade at $70.70 in response. The shares briefly pulled back after racing to a record high of $79.63 on March 12, but have since bounced from support at their 200-day moving average, a trendline that caught a previous pullback in December. 

ATVI Daily Stock Chart

In the option pits, traders have been more bearish than normal in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day put/call volume ratio of 0.75, ranking in the elevated 79th annual percentile. While the low absolute ratio indicates more calls than puts have been bought to open, the high percentile suggests the rate of put buying has been accelerated relative to call buying lately.

Regardless of direction, those purchasing premium on the video game stock are in luck. The stock's SVI of 26% ranks in just the 11th annual percentile, suggesting short-term options are cheaper than usual, from a volatility standpoint.

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