Activision (ATVI) 11/17/09 PriceWatch Alert Targets 14.51% Downside Protection

Posted: Tuesday, November 17, 2009 8:39 AM EDT
By: Market Intelligence Center Staff

Activision (NasdaqNM: ATVI) closed yesterday at $11.72. 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 11.49 and resistance in the 12.03 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 $10.02 area. That is also the break even stock price for this trade. This covered call has an 186 day duration, provides 14.51% downside protection and a 9.78% assigned return rate for a 19.19% 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 $5.30 debit. The trade has an 186 day life and would provide 12.12% downside protection and a 13.21% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Activision does not pay dividends at this time. [ATU-Seven Summits Research]