Activision (ATVI) 10/26/09 PriceWatch Alert Bullish Price Movement

Posted: Monday, October 26, 2009 8:02 AM EDT

Activision (NasdaqNM: ATVI) ended the last trading session at $12.20. So far the stock has hit a 52-week low of $8.14 and 52-week high of $13.14. Activision stock has been showing support around 11.79 and resistance in the 12.85 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 $10.70 area. That is also the break even stock price for this trade. This covered call has a 208 day duration, provides 12.30% downside protection and a 12.15% assigned return rate for a 21.32% 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 $6.15 debit. The trade has a 208 day life and would provide 8.61% downside protection and a 13.82% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). Activision does not pay dividends at this time. [ABR-Seven Summits Research]

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