Selling Put Credit Spreads In Activision Blizzard, Inc. (ATVI)
Implied volatility has spiked in the front month (60%+) in Activision Blizzard, Inc. (ATVI) (July) but is still elevated also in the back month (48%) (The month we will be trading). Although we will be taking this trade through upcoming earnings (scheduled for the 1st of August), we like the risk/reward setup here for the following reasons.
Implied volatility is trading well below historical or statistical volatility and currently has an IV rank of 94 (Maximum 100). This gives the option seller a distinct advantage due to the overpriced nature of ATVI’s options at present.
The technical charts below point to strong underside support where shares look like they will remain buoyant for a considerable period of time. Remember here (with this options strategy) that we only want ATVI to remain buoyant for 3 weeks or so and even at that, we could use defensive strategies to remain in the trade if the position were to go against us. The binary event which is earnings will produce a volatility crush in the aftermath so we want shares to generally trade higher between now and then (August 1st) so our delta risk will be less come that earnings date.
Trade Fill: Selling ATVI August 18th (43 days to expiration) Put Credit Spread ($77.50 & $75 strikes) for $0.75 per spread.
Break-even comes in at $76.75 per share of AVTI. The current share-price is $82.62
‘Remember To Adhere To Rules Regarding Trade Size In Earlier Commentary’