Take-Two Interactive Software, Inc. (TTWO) Options Hot On Cryptic 'Red Dead' Tweet

Both stock and options volume are accelerated on Take-Two Interactive Software, Inc. (NASDAQ:TTWO)

Oct 17, 2016 at 2:39 PM
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Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is flying high today, up 5.8% at $45.16. Boosting TTWO is a cryptic tweet from publisher Rockstar Games, which is owned by Take-Two Interactive, hinting at a sequel to its "Red Dead Redemption" game. In fact, with 6.26 million TTWO shares traded, stock volume has exceeded its previous 52-week peak of 6.18 million shares, hit on Feb. 4. The action is heating up in TTWO's options pits, as well, where volume is running at five times what's typically seen at this point in the day.

By the numbers, around 5,500 TTWO options have traded thus far, well above the average daily volume of 1,362 contracts. Puts have a commanding lead over calls, with 4,460 of the former and 1,061 of the latter on the tape at last check.

Drilling down, TTWO's October 44 put has seen the most action, though it's hard to tell whether positions are being opened or closed. More clear-cut activity has been detected at the stock's November 44 put, where it seems safe to assume traders are buying to open the options. If this is the case, the goal for put buyers is for TTWO to retreat back below $44 by the close on Friday, Nov. 18 -- when the back-month options expire.

Today's put-skewed trading is just more of the same in TTWO's options pits, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, TTWO stock has racked up a top-heavy 10-day put/call volume ratio of 5.30 across this trio of exchanges -- in the 86th annual percentile. Simply stated, puts have been bought to open over calls at a faster-than-usual clip, though some of them may have been of the protective sort.

While analysts have remained upbeat toward the stock, short sellers have been quick to bet against TTWO. In fact, despite dropping 6.5% in the two most recent reporting periods, nearly 16% of the stock's float is sold short. At the security's average pace of trading, it would take more than eight sessions to cover the remaining bearish bets.

Looking at the charts, traders' pessimism toward TTWO seems unwarranted. The stock is up 30% in 2016, and within striking distance of its Sept. 22 record high of $46.78. Plus, after Take-Two Interactive Software, Inc. (NASDAQ:TTWO) pulled back in the wake of notching this notable milestone, it quickly bounced near the $42 level -- home to its rising 80-day moving average, as well as its 20% year-to-date return mark. Should the equity continue to outperform, a capitulation from bearish options traders and/or short sellers could help fuel TTWO's fire.

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