Zynga (ZNGA) is up 12 cents to $2.69 on heavy turnover of 28 million shares after BofA/Merrill upgraded the stock to Buy and as investors brace for earnings. The Redwood City, CA social media company releases results after the closing bell today. 37,000 calls and 13,000 puts traded on the stock so far. The flow includes some opening buying of February 3 calls throughout morning action, with data indicating that 3,500 contracts have been bought-to-open so far on ISE. Total volume in Zynga’s Feb 3 calls across all exchanges is 7,630 contracts. The call option is 11% out-of-the-money and expiring in 10 days. February 3.5 calls, Weekly 2.5 puts, and March 3 calls are the next most actives in Zynga and the largest trade is a 1000-lot of Jun 3 calls at the 35-cent asking price. Implied volatility in the options on the stock is moving up 9.5% to 94 and the $3 Weekly straddle trades at 19 percent of spot. Our models are indicating a possible 23 percent move! Indeed, ZNGA is capable of big post earnings rallies and sell-offs. Average daily post-earnings move over the past five quarters is 15.4 percent, with only one win. The stock rallied 12.3 percent on 10/25 when the company last reported.
About the Author (Author Profile)
Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.