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October 26, 2012  Fri 9:56 AM CT

ATVI: SEE CHART GET CHAIN FIND STRATEGIES
Shares of Activision Blizzard hit a new 52-week low today, and one trader believes that more downside is possible for the struggling videogame maker.

More than 23,000 ATVI options trade, compared to a daily average of 3,200. Only 2,000 of the day's action is in the calls, and a single print of 14,000 January 10 puts make up most of the action.

The puts traded for $0.25, the listed ask price at the time, indicating that they were bought. The previous open interest in the strike was 2,633 contracts, so this is a new position.

Our systems also detected some big ATVI stock prints changing hands, as two blocks of 100,000 shares traded for $11 and $11.015 about 20 minutes before the puts, so the options could be related to the stock. The puts could also be hedging against an existing position in ATVI shares. (See our Education section)

ATVI is down 1.54 percent to $10.89. Shares were above $12 a month ago.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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