This morning, I’m recommending a bullish trade on Activision Blizzard, Inc. (NASDAQ:ATVI), the video game developer and publisher.
Yesterday, the S&P 500 continued its dramatic pullback, dropping below the 2,900 level. This has pushed stocks across the market down, and ATVI’s drop gives us a chance to collect additional premium on put options with lower strike prices.
Why Did ATVI Jump in September?
At the start of September, ATVI jumped above resistance at around $52 per share. Despite “disappointing” second quarter earnings, the stock won over analysts in the mid-September, which continued pushing it higher.
But news that video game sales in August were down caused a reversal. ATVI started heading lower, and now the stock is in an interesting position.
The company just launched Call of Duty: Mobile. The game has already hooked millions of users, and it hasn’t even launched in China. This new game could help push ATVI’s revenue higher heading into 2020.
But at the same time, analysts have soured on the stock, and the entire market is heading lower.
I think ATVI’s fundamentals are strong enough to push it higher, and the launch of its new product should help it survive the bearish selloff in the broader market.
Below, you can see ATVI has been slowly heading higher this year, but as previously described, it broke higher at the start of September. Yesterday, the stock opened lower, and in intraday trading, it got as low as the $50 level.
Daily Chart of Activision Blizzard (ATVI) — Chart Source: TradingView
I’m hoping ATVI can establish support somewhere in the $50-$52 range over the next few days, but just in case it doesn’t, I’m recommending a put write with a strike price at $45, which acted as support in June, July and August.
Sell to open the ATVI Nov. 1st $45 put at about $0.55.
Note: Be sure you are opening the weekly ATVI options that expire on Friday, Nov. 1, 2019.
About Naked Put Writes
A naked put write is a bullish position in which you expect the price of the underlying stock to increase.
If you are holding the option at expiration and the stock is trading below the $45 strike price, you will be put 100 shares of ATVI at $45 per share.
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