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Options Trading Series (ATVI + EA)

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The tech sell-off that started last week with FB has left a lot of golden opportunities. Tech went from severely overbought to oversold, practically overnight.

My weekly scan shows about 3-4 names that fit my criteria of solid names with strong fundamentals and are showing oversold conditions (RSI).

Two of those names and my top pics are ATVI and EA.

EA had a disappointing earnings report which sent shares from ~$150 to $128. Interestingly, if you went through the report, you'd know that the company is still firing on all cylinders (this sell-off was profit taking at high levels in tandem with all of tech). The average analyst price target is ~$165. RSI at 25 is very oversold. The last time it was at this level was in Dec-2017 -- as you can see shares subsequently rebounded nicely. We are in the same set-up.

ATVI sold off in sympathy to EA's report and is also showing oversold conditions (yet not as much as EA). ATVI is set to report earnings on 8/2/18. The average analyst price target is ~$85. While I am jumping in this name now, any miss on earnings will send the shares down to the 200 day moving average around $69 (if not lower). For me, I want to before and after the report given the tailwinds to this company. This is one of the most well-positioned company in the eSports world -- The Overwatch League Grand Finals this past weekend proved that.

So, here's how I'm playing this: Yesterday I went long the 2/15/19 $75 Calls in ATVI.

I am going to wait until after earnings before going long to EA. I want some dust to settle. I will post my position once entered.

Overall, these are great long-term holds and are set up nicely for short-term options trades.

注释

If you are familiar with the video game space, you might ask -- what about TTWO? Grand Theft Auto is still one of the top played games (staggering given how long it's been!).

The only reason that I didn't mention this name is that it's not as diversified as EA/ATVI and there have been a few operational/delay issued that have plagued the stock. It's not as well positioned as the other Big 2.

However, from a technical perspective, shares look attractive for a short-term bounce (RSI is not overly oversold, but it is close nonetheless). Also shares are right at the 200-day moving average.

TTWO reports earnings after the close today. If you are a believer long term it might be wise to play this earnings and go long.

I just went long the 12/21/18 $120 Calls.

Note: this is a riskier trade (for less risk, wait until after earnings).

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Both ATVI (options down 19.94%) and TTWO (options up 88.63%) reported earnings yesterday.

Key takeaways:

ATVI: CEO Bobby Kotick, stated on the earnings call:

“This was another strong quarter for Activision Blizzard. Our portfolio of global franchises enabled us to deliver record first-half revenues and earnings per share. This past weekend we held the Overwatch League Grand Finals. We had a very successful first season as we enhanced our leadership position in esports. And, today we announced two additional Overwatch League franchise sales at record prices, adding Atlanta, Georgia and Guangzhou, China to our league. We plan to announce additional franchises over the next few months.”

Despite fears of Fortnite, ATVI posted better than expected Q2 profits on record mobile revenue, but guidance for the full-year came in on the light side. As someone that first invested in ATVI when it was at ~$23, I can tell you that management has a pattern of guiding conservatively - prices drop on earnings and recovers in a short time frame. Couple notable highlights from the report were (i) Call of Duty World League, which saw minutes watched go up 50% YOY heading into its championships in Columbus, Ohio later this month; (ii) Destiny 2 monthly active users grew in the quarter and showing strong momentum in the 2H of the year; (iii); Blizzard’s World of Warcraft: Battle for Azeroth expansion debuts on August 14, which should give a nice boost for the 14-year-old massively multiplayer online game. Overall, eSports momentum will continue to be the focus. Very positive on this name.

Action: given the decline in ATVI, I will going to wait for "3-days" before adding to my long position mentioned above. I am backing up the truck at ~$70/$69!

TTWO: Interestingly enough, TTWO posted Q2 profits that fell short of consensus while revenue beat. It boosted guidance through current-quarter bookings were forecasted on the light side of expectations. One main highlight was the recurrent consumer spending -- virtual currency, add-on content, and in-game purchases -- made up 62% of total net revenue vs. 41% a year ago boosted by the unstoppable GTA and NBA 1K18 (2K18 set a franchise sales record with more than 10M units sold). Coming down the road is the much-anticipated release of Red Dead Redemption 2. Analysts have come out this morning and updated their prices target -- average price target is at ~$145.

Action: If you jumped into this trade I posted late afternoon yesterday (went long the 12/21/18 $120 Calls), you are up ~88.63% right now. Not bad for a one-day move! Typically I would take my profits/trim this position. However, given how quick this move was, I will keep it open as is. What I might end up doing next week to protect profits is go long the 9/21/18 $130 Puts. Hedging is always prudent.

One final note, if you have any reservations about the video game space, check this out: seekingalpha.com/news/3377195-videogame-sales-third-straight-month

Hope you enjoyed reading, would love your hear your take/insight/analysis.
(and hopefully you are making some money following these trades -- net gain per this post so far is +68.69%). What's the return on the S&P 500 or NASDAQ so YTD?

;-)

Cheers!

交易开始

As I mentioned above, if ATVI hit $70/$69 I would back up the truck. Well that's exactly what I'm doing. RSI is right at the 30 level. What's import is for shares to close above the 200-moving average today. If it can't, RSI is likely going to 25, putting shares are $65.

Average analyst price target is ~$85 (~20% upside).

Good read: seekingalpha.com/article/4196377-activision-blizzard-buy-gaming-stock-giant-q2-pullback

ATVI is a steal at these levels. Adding to my position, you'd be wise to do the same.

注释

EA is a buy right now - just went long the Jan 18, 2019, $135 Calls (options open interest is massive, strong vol!).

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All three big gaming companies are moving higher on Friday, with EA and TTWO leading the way.

Today, EA launched Madden NFL 19 which this year "delivers all-new animation and some of the smoothest gameplay ever." Also, the franchise is now returning to PC which should provide an added boost.

Also, there was unusual options activity in EA with someone stepping in big and buying the 8/24/18 $134 Calls today (volume ~5x the normal daily average). Somone is making a huge bet that shares will rally throughout August.

ATVI is set up nicely bouncing off the 200-day moving average. I want to give it a couple days to see if it can hold before I add more to this position. The risk/reward is strongly in your favor right now -- don't wait long to buy this name if you haven't already.

For those of you who followed my TTWO trade -- congrats! TTWO is pushing back up to its ATH after its most recent earnings report. They recently released in-game play footage of the much-anticipated RD2 -- for true gamers out there, it looks like a masterpiece that is going to generate revenue for years to come (similar to GTA).

TTWO option contracts are up 132.37% right now (not bad for a couple days worth of a trade)! Here's what I would recommend:

1. If you want to take those profits, nothing wrong with doing so -- you just made more than most makeover 2+ years. ;-)

2. Hedge the position with Puts. I will be buying the 9/21/18 $125 Puts.

Gaming is here forever and is only going to get bigger.

Happy Friday ladies and gents!

Cheers!

注释

Adding to ATVI and EA today. When I have strong conviction in a name/option contract, I use every +3% decline to add to positions. These are going to bounce back the fastest when the market recovers.

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A couple of exciting news in the game space:

Video game sales rose 14% in July with hardware and accessories carry the load. seekingalpha.com/news/3385059-videogame-sales-plus-14-percent-july-hardware-accessories-jump

ATVI -- Last week's launch of Battle of Azeroth made it the fastest-selling expansion ever for World of Warcraft. It also makes it one of the fastest-selling PC games of all time. Insane! Also, this morning we received news that ATVI now has a multi-year streaming deal for their eSports Overwatch League with TWTR (another name we are long). seekingalpha.com/news/3385227-twitter-seals-overwatch-league-content-deal

EA -- open beta for Battlefield V beings on Sept 4th. The game is boasting new-real-time ray tracing graphics technology in partnership with Nvidia (NVDA). The footage looks amazing: youtu.be/rpUm0N4Hsd8

Would love to hear your thoughts, any true gamers here? What are you looking forward to?

Cheers!

注释

Great day to be in gaming stock (let's see if this gain can hold), but look at EA. Not moving as much. The momentum and the fundamental story is still intact, I think this is a steal at current levels, so I'm adding to this position.

As long as EA can hold the 200-day moving average (~$124.48) we are all clear to resume to the upside. Many times a stock can overshoot to the downside, so even if we break, I would imagine a sharp bounce back (see what happened in Dec-17). What you would want to do is not buy the falling knife, but wait for this to close back above the 200-day moving average. This is how I am going to play EA.

I'd own the stock and be a buyer of options, this one is going to make you a very nice return over the next 6-12 months.

Adding to: Jan 18, 2019, $135 Calls.

注释

Between the tragic shooting at this year's Madden tournament leading to the cancelation of events, and now the Battlefield V delay (4 weeks) / and cutting booking guidance, this has been a tough week for EA investors. So what now?

The good news is that if you've been in all my trades here (ATVI/TTWO/EA), you are currently up +155%!

As of 8/30:

TTWO = +180%
ATVI = +38%
EA = -63%

Originally when I first mentioned EA I stated: "I am going to wait until after earnings before going long to EA. I want some dust to settle. I will post my position once entered."

Quite frankly, I didn't give EA enough time to settle, but I was convicted in the name/technical levels (I'm even more so now). We did get a few nice pops to the upside, but the sellers were aggressive; and despite that, something like this is hard to predict (this IS the risk with trading/investing in individual names).

I'm still net bullish on EA and think this sell-off just put the risk/reward strongly on your side. I will give this one a couple days before reevaluating positioning. Since our current position (Jan-18 Calls) still has a couple months, I will add weekly Calls/Puts to play around this volatility. I will post positions once entered.

From a technical perspective, RSI suggests oversold but a bit more downside can occur. If EA can't hold $114, I think the downside could be much further to the $105-$100 level. However, I don't think that's likely given the delay/cut isn't very significant. Next few days will be key to watch.

Lastly, if you've been following along but have yet to open any positions, this is a sell-off in EA is a golden opportunity to start a position. If you only buy stocks vs. options, I'd suggest buying here and if it falls further, average in. Play this for the long-term. EA is a dominant player and 3-5 years from now you will wish you bought at these levels.

I'll post-trade and give periodic updates.

#LongGaming!

注释

To protect profits, I just opened a small position to hedge:

TTWO - 9/14/18 $135 Puts
ATVI - 9/14/18 $75 Puts

Expected some volatility ahead, long weekend ahead.

注释

Good thing we bought those Puts yesterdays. ;-)

Puts return:

TTWO - 9/14/18 $135 Puts - up 52%
ATVI - 9/14/18 $75 Puts - up 92%

Let sell/trim these and collect some cash. I still want to hold on to a few contracts over the weekend.

Cheers!

注释

ATVI is bouncing to the upside this morning likely driven by news that they thir Overwatch League added six new teams bringing the total to 20 for 2019 season.
seekingalpha.com/pr/17263891-overwatch-league-signs-six-teams

EA and TTWO are also bouncing this morning. Don't forget next month will see the release of some of the most anticipated games of the year. More updates on this to come. I will likely add to my EA position towards the end of next week or mid-month. I want to see a base form. Overall, these 3 names are where you want to be.

I'll keep everyone posted on any moves I make.

Enjoy the weekend - Cheers!

注释

Fantastic day for ATVI (up 51%) / TTWO (up 23%)!

If you've been following my trades since the beginning, here's what your approximate total return is so far (includes all calls/puts, note it will vary slightly depending on when you executed positions):

ATVI-Calls:- +83%
ATVI-Puts: +92%

TTWO-Calls: +161%
TTWO-Puts: +52%

EA - Calls: -75%

Total = 313%!

Congrats if you even capture 1/3 of this! For some perspective, here's what the overall market generated YTD:

Dow Jones: +5.06%
S&P 500: +8.01%
NASDAQ: +15.49%

While EA has been 'left for dead' at the moment, I think the time to add is approaching (will add weekly calls to play catch up); delaying the release of Battlefield was smart given the massive release slate next month with CoD & RD2. I suspect EA will rally in late Oct/Nov. The reason why to come.

Quick Disclaimer: Remember ladies and gents, I'm not here saying I will have these kinds of winners every time; looking at my post you can see winners and losers -- the key and 'my goal' is for you to end the year not only in positive (beating the overall markets) but significantly higher than the market - capturing meaningful alpha.

More to come, stay tuned.

Cheers!

注释

ATVI is now up over 115%. The stock is overbought short-term. I am trimming this position and hedging with Puts.

Overall, stay long folks! Just trading around all the volatility.

注释

ATVI 10/19/2018 $80.00 Puts

注释

Late post, I closed my ATVI/TTWO positions late last week (including hedges).

I will buy back before earnings. Markets will continue to overact to yields rising, but this will be short lived. For those long the stock instead of options now is a good time to add/average in.

I'll update on my positioning as I enter.

注释

EA 12/21/18 $110 calls
ATVI 1/18/19 $75 calls

注释

Video game stocks have been beaten up (excessively at this point). Both of these last call options will expire worthless. Luckily, the larger positions were already sold. Sizing of positions is always important.

Long-term, I think ATVI / EA / TTWO are very solid names to own. I will be looking at new longer-dated options as we move into 2019.