Activision Blizzard Has Large Option Traders' Attention Following Bullish Analyst Commentary

After a disastrous end to 2018, video game publisher Activision Blizzard, Inc. (NASDAQ: ATVI) shares stabilized in 2019. On Friday, Activision had the attention of several large option traders, and the action was more bullish than bearish.

Benzinga · 01/10/2020 19:32

After a disastrous end to 2018, video game publisher Activision Blizzard, Inc. (NASDAQ: ATVI) shares stabilized in 2019.

On Friday, Activision had the attention of several large option traders, and the action was more bullish than bearish.

The Trades

Benzinga Pro subscribers received seven option alerts related to unusually large trades of Activision options. Here are the largest:

  • At 9:46 a.m., a trader sold 4,500 Activision call options with a $60 strike price expiring on Jan. 17 near the bid price at 43 cents. The trade represented a $193,500 bearish bet.
  • At 11:32 a.m., a trader bought 737 Activision call options with a $60 strike price expiring on Jan. 17 near the ask price at 51.1 cents. The trade represented an $36,660 bullish bet.
  • At 10:43 a.m., a trader sold 1,500 Activision put options with a $55 strike price expiring in January 2022 at the bid price of $7.651. The trade represented a $1.14 million bullish bet.
  • At 12:34 a.m., a trader sold 500 Activision put options with a $50 strike price expiring in January 2021 at the bid price of $3.30. The trade represented an $165,000 bullish bet.

All together, the four largest trades represented a net bullish bet of more than $1.14 million.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of the largest Activision trade on Friday morning, it could have potentially represented an institutional hedge.

Game On In 2020?

Activision traders may have mixed feelings heading into 2020 given the stock’s underperformance since the fourth quarter of 2018.

The mostly bullish trading action comes after Stifel reiterated a Buy rating on Friday and raised its price target for the stock to $70. Stifel’s bullish commentary follows Nomura naming Activision its top stock pick in the interactive entertainment group for 2020.

Nomura analysts Mark Kelley and Andrew Marok said this year will be a big year in the gaming industry given the next-generation X-Box and PlayStation consoles.

“We see a relatively muted effect on publishers (especially the largest players), as the technological jump from the current generation to the upcoming one is not as stark as previous transitions, though increased competition for gamers' spend from big-name launch titles and the consoles themselves might come into play,” the analysts wrote.

Benzinga’s Take

The most noteworthy large Friday trades for Activision investors were the two trades in January 2021 and 2022 puts given they are longer-term in nature. Maybe it was the bullish analyst commentary, but something seems to have triggered at least one large trader to abandon or at least scale down a bearish long-term Activision trade.

The stock trades around $59 t time of publication.

Do you agree or disagree with these predictions? Email feedback@benzinga.com with your thoughts.

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