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Zynga, Inc. Message Board

  • mindless_on_the_wire mindless_on_the_wire Jul 30, 2012 1:33 PM Flag

    Schaeffer's Daily Option Blog

    Weekly call traders are gambling on a short-term rebound for Zynga Inc (NASDAQ:ZNGA - 3.03), which is still lingering near record-low territory. In early afternoon action, the stock has already seen roughly 20,000 calls cross the tape, compared to its average midday volume of around 13,000 calls.

    Most popular are the weekly 3- and 3.50-strike calls, which have seen around 3,800 and 3,200 contracts change hands, respectively. Volume has exceeded open interest at both strikes, and the majority of the calls have traded at the ask price, pointing to buy-to-open activity. By purchasing the calls to open, the buyers are expecting ZNGA to erase some of last week's earnings-induced losses by the end of Friday's session, when weekly options expire.

    However, despite underperforming the broader S&P 500 Index (SPX) by more than 64 percentage points during the past three months, bullish option betting is par for the course for ZNGA. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a 10-day call/put volume ratio of 3.89, indicating that traders have bought to open nearly four calls for every put during the past two weeks. Likewise, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.36 indicates that short-term calls comfortably outnumber their put counterparts.

    In the same vein, many analysts remain devoted to ZNGA's fan club. Currently, eight brokerage firms maintain "strong buy" endorsements on the stock, compared to nine lukewarm "holds" and just one "sell" or worse rating. Plus, the consensus 12-month price target on the equity sits at $5.47, representing a premium of 77% to ZNGA's closing price of $3.09 on Friday.

    At last check, ZNGA has shed 1.8% to explore the $3.03 level. Last week, the security touched an all-time nadir of $2.97.

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