ATVI Analysis

Activision Blizzard Inc. (ATVI)

Update 5/5/2017: ATVI gapped to the upside and then retreated somewhat after earnings were published, moving beyond my target and allowing me to exit at 41.6% of maximum potential profit.

Shares showed a net rise of 1.6% over one day, or a +575% annual rate. The options position produced a +71.4% yield on debit for a +26,043 annual rate


ATVI publishes earnings on Thursday after the closing bell.

I shall use the series of monthly options that trade for the last time 15 days hence, on May 19. Although at this point I would prefer the May 12 weeklys, which expire in eight days, the earlier series lacks sufficiently open interest to support a trade.

Implied volatility stands at 33%, which is 3.2 times the VIX, a measure of the volatility of the S&P 500 index.

ATVI’s IV stands in the 72nd percentile of its annual range and the 82nd percentile of its most recent broad movement.

The price used for analysis was $53.14.

Premium: $3.17 Expire OTM  
ATVI-iron fly Strike Odds Delta
Long 60.00 93.3% 8
Break-even 56.67
Short 53.50 54.6% 49
Short 53.50 45.4% 51
Break-even 50.17
Long 47.00 89.1% 9

The premium is 49% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

I have entered a position on ATVI as described above. The stock at the time of entry was priced at $15.13.

By Tim Bovee, Portland, Oregon, May 4, 2017

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