Activision (ATVI) 11/10/09 PriceWatch Alert Up To 22.29% Return

Posted: Tuesday, November 10, 2009 8:10 AM EDT
By: Market Intelligence Center Staff

Activision (NasdaqNM: ATVI) closed yesterday at $11.54. 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 11.31 and resistance in the 11.71 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 11 covered call (AQV EK) for a net debit in the $9.84 area. That is also the break even stock price for this trade. This covered call has a 193 day duration, provides 14.73% downside protection and an 11.79% assigned return rate for a 22.29% 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 7.50 Call (VEN AU) and selling the May '10 11 call (AQV EK) for a $3.05 debit. The trade has a 193 day life and would provide 8.58% downside protection and a 14.75% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Activision does not pay dividends at this time. [ATU-Seven Summits Research]