Activision (ATVI) 10/21/09 PriceWatch Alert Up To 18.86% Return

Posted: Wednesday, October 21, 2009 8:26 AM EDT
By: Market Intelligence Center Staff

Activision (NasdaqNM: ATVI) closed yesterday at $12.46. So far the stock has hit a 52-week low of $8.14 and 52-week high of $13.85. Activision stock has been showing support around 12.20 and resistance in the 12.70 range. Technical indicators for the stock are Bullish and S&P gives ATVI a neutral 3 STAR (out of 5) hold rating. ATVI appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 12 covered call (AQV EL) for a net debit in the $10.81 area. That is also the break even stock price for this trade. This covered call has a 213 day duration, provides 13.24% downside protection and an 11.01% assigned return rate for an 18.86% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the ATVI Jan '11 5 Call (VEN AA) and selling the May '10 12 call (AQV EL) for a $6.00 debit. The trade has a 213 day life and would provide 11.72% downside protection and a 16.67% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). Activision does not pay dividends at this time. [WBA-Seven Summits Research]