Shares of game studio Activision Blizzard (ATVI) have broken down to the lower end of their trading range over the past few months. One trader sees the possibility for a bounce back higher in the coming months.
That’s based on the February 2022 $92.50 calls. With 204 days until expiration, 8,940 contracts traded against a prior open interest of 141 for a 63-fold surge in volume. The buyer of the calls paid $5.10 to make the trade.
Shares have recently dropped to around $84, coming off a high of $102 in the past year, but with shares mostly trading sideways in the $90s. Over the past year, shares are up 11 percent, underperforming the S&P 500 by nearly 24 percent.
The video game studio has seen healthy double-digit increases in both revenue and earnings in the past year, and has a 27 percent profit margin, on par with a solid tech firm.
Action to take: Investors may like shares here to play a potential rebound, as the company pays a dividend. However, the dividend is low at about 0.5 percent right now, and it hasn’t been raised over the past year.
Traders betting on the current trading range to hold should fare well with the February calls. There’s ample time for the trade to play out. And the $92.50 strike price is slightly higher than present, but well below the highs. It’s easy to see this option moving in-the-money in the coming weeks, offering mid-to-high double-digit returns for traders.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.