ATVI Analysis

Activision Blizzard Inc.  (ATVI)

Update 11/3/2017: ATVI’s earnings were $0.47 per share, down 12.96% from the consensus estimate of $0.54. Shares rose more than $3 in overnight trading and then, with the opening bell, fell to more than $5 below that peak in the first half hour of trading. I exited shortly after the opening bell, for 6% of maximum potential profit.

The actuality was the opposite of the outcome suggested by Zacks‘ algorithms, which was bullish on ATVI for the longer term and produced an earnings surprise score of 4.61%.

ATVI closed the post-earns session $2.25 below the prior session close, narrower than the downside profit zone of $2.86. The actual post-earns movement over the past year on average was greater, at $2.97, although the central tendency fit within the profit zone, at $1.82.

Shares declined by 1.1% over my holding period of less than a day, or a -397% annual rate. The options position produced a +6.4% return for a +2,330% annual rate.

ATVI publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time 15 days hence, on Nov.. 17.

Implied volatility stands at 38%, which is 3.8 times the VIX, a measure of the volatility of the S&P 500 index.

ATVI’s IV stands in the 75th percentile of its annual range and the 90th percentile of its most recent broad movement.

The price used for analysis was $65.16.

I shall use a bull put vertical spread for my strategy, based on  the probability of a positive earnings surprise calculated by the Zacks earnings surprise predictor algorithm, and also my reading of the present short-term trend.

Premium: $0.50 Expire OTM
ATVI-vertical Strike Odds Delta
Long 61.00 75.5% 22
Break-even 63.50
Short 63.00 64.2% 33

The premium is 25% of the width of the position’s wings.

The risk/reward ratio is 2.9:1.

The bid/ask spread is 9.4%.

Decision for My Account

I have entered a bull position on ATVI as described above.  The stock at the time of entry was priced at $65.36.

By Tim Bovee, Portland, Oregon, November 2, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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