King Digital Entertainment plc (KING) Traders Predict Short-Term Churn

Call sellers are skeptical of King Digital Entertainment PLC (KING)


Published on Jan 2, 2015 at 2:36 PM
Updated on Apr 20, 2015 at 5:32 PM

King Digital Entertainment PLC (NYSE:KING) has been wallowing in the red most of the day, and was off by as much as 4.7% this morning. At last check, however, the shares had pared a portion of their losses, down a more modest 1.6% at $15.11. Meanwhile, short-term options traders have been busy, as the stock's 30-day at-the-money implied volatility has popped 3.8% to 74.9%.

Digging deeper, data from the International Securities Exchange (ISE) indicates sell-to-open activity at the January 2015 16.54-strike call. In other words, these traders are rolling the dice on a near-term ceiling for KING -- expecting the shares to remain below $16.54 through the close on Friday, Jan. 16, when front-month options expire.

Longer term, KING has been a technical laggard. The stock has shed more than one-quarter of its value of its value since going public in late March, and is struggling to fill a mid-August bear gap, before which the shares were trading north of $18.

Options traders aren't the only ones displaying skepticism toward King Digital Entertainment PLC (NYSE:KING). Seven of 11 covering analysts rate the shares a "hold," and 19.4% of the equity's float is sold short -- which represents nearly eight sessions' worth of pent-up buying power, at average daily trading volumes.

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