Put Traders Charge Video Game Stock Before Earnings

Put activity is running at double the intraday average

Deputy Editor
Nov 2, 2021 at 2:03 PM
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The shares of Activision Blizzard Inc (NASDAQ:ATVI) are lower today, last seen down 1.8% to trade at $77.96. It seemed the stock was soaring into November, but resistance at its descending 80-day moving average contained the rally last month. Now down just over 16% in 2021 and on the verge of giving up its 1% year-over-year lead, today's negative price action comes just ahead of the company's third-quarter earnings report, due out after the close today. Below, we'll dig deeper on ATVI's technical setup, and what options traders are up to ahead of the event. 

ATVI Chart 2 Nov 11

A look back at the video game company's earnings history reveals that five of the past eight next-day sessions had a positive post-earnings response, including three-straight that started with a 9.6% post-earnings pop in February. The security averages a next-day return of 3.4%, regardless of direction, the last two years. This time around, the options market is pricing in a much bigger move of 7.8% for tomorrow morning's trading.

Despite that optimistic setup, there's ample put activity in today's options pits ahead of the event. So far, 12,000 puts have crossed the tape so far -- double what's typically seen at this point and just outpacing the 11,000 calls traded. Most popular is the weekly 11/5 70-strike put, where new positions are opening.

Echoing this bearish sentiment, Activision Blizzard stock's Schaeffer's put/call open interest ratio (SOIR) sits in the elevated 83rd percentile of readings from the past 12 months. In simpler terms, short-term traders have rarely been more put-biased when looking at front month contracts.

It's worth noting that a short-term pullback may be in the cards. This is per ATVI's Relative Strength Index (RSI) of 73.4, which sits just on the cusp of "overbought" territory. 

 

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