Zynga Inc. (ZNGA) Bears Bank On a Post-Earnings Pullback

Zynga Inc (ZNGA) put volume more than doubles call volume

May 1, 2015 at 11:24 AM
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Zynga Inc (NASDAQ:ZNGA) puts have been growing in popularity at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the past 10 days across those exchanges, the stock has accumulated a put/call volume ratio of 0.27, in the 86th percentile of its annual range.

Today, ZNGA puts more than double the pace of calls. Far and away the most active put is the May 2.50 strike, where it appears buy-to-open activity is transpiring. By purchasing these at-the-money puts, speculators anticipate ZNGA will drop back below $2.50 by the close on Friday, May 15, when front-month options expire.

The stock closed below the strike as recently as yesterday, and today is up 1.9% around midday to trade right at $2.50. However, year-to-date, ZNGA is still down 6%, and could run into resistance at its 10-week moving average -- currently located at $2.56.

Looking ahead, Zynga Inc (NASDAQ:ZNGA) will hit the earnings stage next Thursday night. Historically, the shares have moved an average of 6.7% in the session following the past eight such events. However, near-term straddle information shows the options market is pricing in a move of nearly 12%.

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