The iShares Expanded Tech-Software Sector ETF (BATS:IGV) has mostly been in consolidation mode since August, struggling to break out above the $220 level. Not surprisingly, this price action is representative of the price action seen from one of the exchange-traded fund's (ETF) largest holdings, Activision Blizzard, Inc. (NASDAQ:ATVI). The video game company, along with sector peer and fellow IGV holding Take-Two Interactive Software, Inc. (NASDAQ:TTWO), are set to report earnings after the close tomorrow, Nov. 6. Let's check in on the shares of ATVI and TTWO ahead of the reports.
Activision Could Break Free of Consolidation Pattern
Starting with ATVI, the shares have been in a tight range between the $53 and $56 levels since August, as investors appear to be taking a wait-and-see approach after a forgettable start to the year for the stock. While the security is near the top of this range today at $56.06, the tepid price action is evident from ATVI's 30-day historical volatility reading of 21%, which ranks in just the first annual percentile. However, things could be about to change in a major way.
For instance, the options market is pricing in a one-day, post-earnings swing of 8.6% for the equity, much larger than its average earnings move of 5% over the past two years. Looking closer at Activision Blizzard's options data, the weekly 11/8 60-strike call is most popular in today's trading, while new positions are opening at the weekly 11/8 57-strike call.
Call buying has, in fact, been overly popular at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where the 10-day call/put volume ratio of 7.40 stands in the 94th annual percentile. Still, peak front-month open interest coming into today was at the November 45 put, where major sell-to-open activity has been confirmed.
TTWO Bulls Target the $120 Level
The price action for fellow video game stock TTWO has been more clear, as today it touched its lowest point since late July, last seen at $117.03. The shares have been moving lower since their August peak of $135.70, with the 50-day moving average recently applying pressure.
Either way, the options market is pricing in a 12.4% post-earnings swing for Take-Two stock on Friday, which is well above its average move of 7.8% from the past eight quarters. As for sentiment, put buying picked up during the past two weeks at the ISE, CBOE, and PHLX, though call buying remained more popular on an absolute basis.
In the November series, heavy call open interest sits at the 120 strike, where data confirms buy-to-open activity has occurred. This contract is actually the most popular in today's trading, and traders are also targeting the November 135 call, while new positions are opening at the weekly 11/08 116-strike call, too.