3 Volatile Stocks Seeing Heavy Options Trading

ATVI is getting hit by sector headwinds today

by Karee Venema

Published on Feb 6, 2019 at 3:19 PM
Updated on Feb 6, 2019 at 3:19 PM

Amid a relatively muted session for the broader equities market, several individual stocks are making big moves, including Apple supplier Skyworks Solutions Inc (NASDAQ:SWKS), "Call of Duty" creator Activision Blizzard, Inc. (NASDAQ:ATVI), and music streaming service Spotify Technology SA (NYSE:SPOT). Here's a quick look at what's moving the shares of SWKS, ATVI, and SPOT.

Buyback Buzz Boosts Skyworks Solutions Stock

Skyworks Solutions stock is up 12% today at $85.10, after the semiconductor company's $2 billion stock buyback announcement was met with an onslaught of bullish brokerage notes -- including price-target hikes to $95 at both D.A. Davidson and Needham. This is offsetting weak fiscal first-quarter results for Skyworks, and has the shares on track to close above their 160-day moving average for the first time since July.

Calls are outpacing puts in today's trading by a nearly 3-to-1 ratio, though this skew echoes the withstanding trend seen among short-term traders. To be specific, SWKS' Schaeffer's put/call open interest ratio (SOIR) of 0.75 ranks in the 14th annual percentile, meaning speculators are more call-heavy than usual among options expiring in three months or less.

Activision Blizzard Bull Bets on a Quick Bounce

The shares of Activision Blizzard hit a two-year low of $42.53 earlier, last seen down 10.7% at $42.71. Ahead of ATVI's turn in the earnings confessional next Tuesday, Feb. 12, the security is sinking on sharp post-earnings sell-offs for two video game giants. The stock has now taken a 50% haircut from its Oct. 1 record high at $84.68, and has breached a recent floor near $46.

At least one options trader is betting on a quick bounce back above here. Amid heavy volume -- the roughly 100,000 contracts traded so far is five times what's typically seen -- a block of 3,340 February 46 calls was likely bought to open for $1.33 apiece, or $444,220 (number of contracts * premium paid * 100 shares per contract). This is the most the speculator stands to lose if ATVI settles below the strike at the close next Friday, Feb. 15, while profit will accumulate on a move north of breakeven at $47.33 (strike plus premium paid).

Weak Guidance Weighs on Spotify Stock

Spotify shares were down 7% earlier, but have since pared these losses to 3.3% at $134.71. While the music streaming service reported a surprise operating profit in the fourth quarter, as well as an impressive rise in revenue and monthly subscribers, it also gave weak guidance for 2019 and said it's purchasing podcast companies Gimlet Media and Anchor for an undisclosed amount. Plus, RBC cut its SPOT price target to $190 from $200.

SPOT options volume is accelerated today, with roughly 16,000 calls and 15,000 puts on the tape -- four times the expected intraday amount and put volume approaching a new annual high. The weekly 2/8 130-strike put is most active, and it looks like new positions are being initiated here. It's not clear if they're being bought or sold, though the $130 level has served as a floor for Spotify since mid-January.

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