Bearish Betting Finally Takes Off on Zynga Inc. (ZNGA)

Zynga Inc (ZNGA) is seeing buy-to-open activity at its May 2.50 put

Digital Content Group
Apr 20, 2015 at 3:28 PM
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Option bulls have kept the faith in Zynga Inc (NASDAQ:ZNGA), despite its year-to-date deficit to 9%. The stock's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 18.59, indicating nearly 19 calls have been bought to open for every put in recent weeks. What's more, the ratio ranks higher than four-fifths of comparable readings taken in the last year.

Things are markedly different today, though, with puts outstripping calls by a healthy margin. Most active is the May 2.50 put, where new in-the-money positions are seemingly being purchased. In other words, the buyers are banking on ZNGA to continue trending lower through the close on Friday, May 15, when the options expire.

This negativity is echoed among short sellers. More than one-tenth of ZNGA's float is sold short, which would take over a week to buy back, at average daily trading volumes. In fact, some of the recent call buying -- especially at out-of-the-money strikes -- could be the work of short sellers hedging.

As alluded to, Zynga Inc (NASDAQ:ZNGA) has struggled on the charts in 2015, exacerbated recently by a management shake-up. Today, the shares are off 1% at $2.42.

 

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