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Puts Pop With Video Game Stock Under Political Pressure

Patrick Martin

Earlier today, President Donald Trump cited video games as the driver behind the two mass shootings over the weekend in El Paso, Texas and Dayton, Ohio. Trump's comments echoed that of House Minority Leader Kevin McCarthy, sending the video games sector lower across the board. Among the losers is Zynga Inc (NASDAQ:ZNGA), and options traders are taking notice.

More specifically, ZNGA has seen almost 2,000 put options change hands today -- 1.5 times what's typically seen at this point and volume pacing for the 90th percentile of its annual range. Most of this action is centered around the weekly 8/23 6-strike put, where new positions are being opened. This indicates options traders are betting on continued struggles from ZNGA in the coming two-and-a-half weeks, when the options expire. 

This put bias today runs counter to the options trend seen from ZNGA lately. In the last ten days, 41,420 long calls crossed in the past 10 days at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 2,846 puts.

Regardless of direction, traders looking to speculate on the video game stock's near-term momentum should consider options. Zynga's Schaeffer's Volatility Index (SVI) of 41% is in just the 22nd percentile of its annual range. In simpler terms, short-term options are pricing in relatively tame volatility expectations for ZNGA at the moment.

On the charts, Zynga is down 5% to trade at $5.92 at last check. ZNGA nabbed a seven-year high of $6.65 on Thursday, but today's sell-off has the stock on track to breach its 100-day moving average on a closing basis for the first time since late December. Nevertheless, the video game stock is still up nearly 50% in 2019.

 

Daily Stock Chart ZNGA