King Digital Entertainment PLC (KING) Traders Eye an End-of-Year Rally

King Digital Entertainment PLC December options were popular on Tuesday

by Karee Venema

Published on Dec 10, 2014 at 10:33 AM
Updated on Apr 20, 2015 at 5:32 PM

Calls have been the options of choice on King Digital Entertainment PLC (NYSE:KING) in recent weeks. In fact, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 57.88 calls for every put over the past 10 sessions.

On Tuesday, calls crossed the tape at a rate 1.8 times the daily average, and outpaced puts by a 7-to-1 margin. A number of speculators targeted the front-month series, and the stock's 30-day at-the-money implied volatility (IV) soared 8.6% to 69.4%, reflecting the growing demand for near-term contracts.

Specifically, the December 17 and 20 calls saw a collective 4,807 contracts traded. The majority of these did so on the ask side, IV jumped, and open interest rose at both strikes overnight, making it safe to assume new positions were purchased.

Based on KING's current perch at $17.55, the lower-strike calls are already in the money (ITM). The options market seems fairly confident the stock will be north of $17 at the close on Friday, Dec. 19, as delta on the call is docked at 0.63. Meanwhile, considering KING hasn't toppled the round-number $20 mark since late July, delta on the higher-strike call is perched at a slimmer 0.19.

Technically speaking, KING has made some volatile moves since going public in late March, with the shares sitting roughly 14% below their IPO price of $20.50. More recently, though, the stock has rallied 64.3% from its Oct. 14 all-time low of $10.68. With 21.6% of King Digital Entertainment PLC's (NYSE:KING) float sold short, a portion of the recent call buying -- specifically at out-of-the-money strikes -- may have been at the hands of shorts hedging against any additional upside.


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 Latest Investor's Guide to Precious Metals
Learn how to protect savings and maximize returns by investing in precious metals.
Wall Street Reclaims Two Key Trendlines This Week
U.S.-China tensions and dire economic data still weigh, though
Dell Stock Jumps on Upbeat First Quarter
DELL announced an upbeat first-quarter report
The Latest Investor's Guide to Precious Metals
Learn how to protect savings and maximize returns by investing in precious metals.