Cautious trade in Activision Blizzard
Traders are worried about more downside in Activision Blizzard.
optionMONSTER's Depth Charge monitoring program detected the purchase of 2,500 May 17 puts for $0.80 and the sale of an equal number of May 24 calls for $0.44. That translates into a cost of $0.36.
Puts lock in the price where the video-game maker can be sold, which guards against a big drop. Short calls generate income and obligate investors to deliver shares if they rally. Combining the two strategies can create a protective collar , ensuring a minimum exit price of $16.64 and allowing a maximum of $23.64. (See our Education section for other hedging techniques.)
ATVI fell 2.95 percent to $19.43 yesterday and is down 20 percent from its all-time high in early September. It's been struggling despite strong results and has formed a potential "head and shoulders" reversal pattern on its chart starting in March. That could make some chart watchers fear more losses are in store.
Overall option volume was slightly above average in the session, with the collar accounting for more than two-thirds of the total. The strategy was also interesting because it targeted a level near the late-summer peak as the top of its range.
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