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May 8, 2014  Thu 11:20 AM CT

ATVI: SEE CHART GET CHAIN FIND STRATEGIES
Call selling sees limited upside in Activision Blizzard.

A trader sold 4,990 August 24 calls for the bid price of $0.29 today, according to optionMONSTER systems. This is a new opening position, as its volume was more than 10 times the previous interest in the strike.

The calls do not appear tied to any trading in ATVI stock identified by our scanners today, so they could have been sold naked with an initial bearish bias. Alternatively, they could have been traded against an existing long position to create a covered-call strategy, which would be bullish up to the $24 strike price but not beyond. (See our Education section)

ATVI is up 0.14 percent to $21.04 in midday trading, a day after gapping higher from the $19 level on strong quarterly results. The video-game developer is now trading near its highest levels since September 2008.
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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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