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Bulls Pile on Zynga: Calls Outpace Put by Margin of 6-1

Written by:
Aaron Goldstein
Published on:
Jun/28/2013
Bulls Pile on Zynga: Calls Outpace Put by Margin of 6-1

Zynga is looking good, despite a few bumps in the road, this according to Schaeffer’s Blog.

The world’s largest social gaming site’s share is up 19 percent on the year but the equity's year-over-year deficit of 47.5% reveals a long-term technical laggard, the blog notes.

The bulls are all over Zynga:

Although Zynga Inc (NASDAQ:ZNGA) is trading 1.4% lower today, calls are outpacing puts by a margin of roughly 6-to-1. One of the more active positions thus far is the January 2015 1.50-strike call, where all of the 1,000 contracts traded have done so at the ask price. Implied volatility was last seen 5 percentage points higher, and volume is outstripping open interest, pointing to buy-to-open activity.

With ZNGA perched near $2.82, these calls are currently in the money. However, in order for traders to turn a profit, the equity needs to muscle above breakeven at $3.10 (strike plus the volume-weighted average price of $1.60) over the next year-and-a-half. Risk, meanwhile, is limited to the initial cash outlay. The options market is pretty confident this call will remain in the money for the duration of its existence, as delta for the position is docked at 0.88, or 88%.

- Aaron Goldstein, Gambling911.com

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