Activision (ATVI) 11/2/09 PriceWatch Alert With 16.16% Downside Protection

Posted: Monday, November 02, 2009 8:44 AM EDT
By: Market Intelligence Center Staff

Activision (NasdaqNM: ATVI) ended the last trading session at $10.83. 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 10.55 and resistance in the 11.33 range. Technical indicators for the stock are Bearish 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 10 covered call (AQV EB) for a net debit in the $9.08 area. That is also the break even stock price for this trade. This covered call has a 201 day duration, provides 16.16% downside protection and a 10.13% assigned return rate for an 18.40% 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 10 call (AQV EB) for a $4.60 debit. The trade has a 201 day life and would provide 11.36% downside protection and an 8.70% assigned return rate for a 16.00% annualized return rate (for comparison purposes only). Activision does not pay dividends at this time. [ABR-Seven Summits Research]