Activision Call Trades Increase to Record After Single Bet on 19% Advance
Activision Blizzard Inc. call volume surged to a record yesterday because of a single trade betting that the world’s largest video-game publisher will gain 19 percent by February 2011. The transaction accounted for 4.4 percent of all U.S. option volume.
More than 500,000 Activision calls traded, making them the most-active in the U.S., as the stock fell 1.5 percent to close at $10.89. The trade, which involved four different calls, earns the most should the shares rise to about $13 by expiration and is profitable if the stock trades between about $12 and $14 at expiration, according to a report from Livevol Inc., a San Francisco-based provider of options market data and analytics.
“It’s a gigantic trade -- just enormous -- there’s no other way to cut it,” said Etai Friedman, an options strategist with MKM Partners LP in Stamford, Connecticut. “It’s a bullish bet.”
Activision is scheduled to release “Call of Duty: Black Ops” in November and pre-orders have exceeded levels for the earlier “Call of Duty,” the company said on Aug. 5. Downloadable content for the “Call of Duty” franchise and subscriptions for the online “World of Warcraft” helped Activision buck the 15 percent decline in June U.S. industry sales of game software reported by NPD Group Inc.
In yesterday’s trade, a modified version of an “iron condor” strategy, an investor bought 125,000 February $12 calls, and purchased 62,500 each of the same month’s $14 and $15 calls while selling 250,000 of the February $13 calls, according to Livevol.
Activision, controlled by Paris-based Vivendi SA, tumbled 6.5 percent to $10.99 on Aug. 6 after it projected third-quarter profit and revenue below analysts’ estimates. Second-quarter net income rose to 17 cents a share from 15 cents a year earlier.
Activision is down 2 percent this year, less than the 2.8 percent decline for the Nasdaq-100 Index, which gets almost two- thirds of its market value from technology stocks.
To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.
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