King Digital Entertainment PLC (KING) Bulls See a Strong Start to 2015

King Digital Entertainment PLC's January 2015 20.54-strike call was bought to open yesterday

Dec 19, 2014 at 10:36 AM
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Since hitting a record low of $10.68 in mid-October, King Digital Entertainment PLC (NYSE:KING) has bounced 53% to trade at $16.33. Against this backdrop, option traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 14.53 calls for every put over the past 50 sessions.

This call-skewed trend was witnessed on Thursday, where the contracts traded at five times the daily average, and outpaced puts by a nearly 22-to-1 margin. Option bulls set their sights on the stock's January 2015 20.54-strike call, initiating new long positions to bet on an extended rally for the shares. Considering KING hasn't traded north of the strike since late July, delta on the call is docked at 0.19, suggesting a less than 1-in-5 chance of an in-the-money finish at January options expiration.

Outside of the options pits, sentiment toward the gaming issue isn't so sanguine. Short interest, for example, accounts for 18.4% of the stock's available float. In light of this, a portion of the recent call buying -- particularly at out-of-the-money strikes -- could be at the hands of short sellers hedging against any additional upside for King Digital Entertainment PLC (NYSE:KING).

 

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