Activision (ATVI) 11/12/09 PriceWatch Alert Up To 13.62% Downside Protection

Posted: Thursday, November 12, 2009 8:32 AM EDT
By: Market Intelligence Center Staff

Activision (NasdaqNM: ATVI) closed yesterday at $11.38. 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 10.80 and resistance in the 11.88 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 $9.83 area. That is also the break even stock price for this trade. This covered call has a 191 day duration, provides 13.62% downside protection and an 11.90% assigned return rate for a 22.75% 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 11 call (AQV EK) for a $5.10 debit. The trade has a 191 day life and would provide 11.25% downside protection and a 17.65% assigned return rate for a 34.00% annualized return rate (for comparison purposes only). Activision does not pay dividends at this time. [THA-Seven Summits Research]