Bulls are powering up Shanda Games

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The activity is turning bullish in video-game stocks, and the bulls are flocking to Shanda Games.

optionMONSTER's Heat Seeker tracking system detected two spurts of heavy call activity in the Chinese company yesterday: First investors bought about 2,20 September 7.50 calls for $0.25 to $0.30. In the afternoon, more than 5,000 December 7.50 calls were purchased for $0.65 to $0.75.

GAME Chart The trades pushed total options volume in the stock to 40 times greater than average, with calls accounting for more than 99 percent of the activity.

GAME rose 3.54 percent to $6.72 and is up 23 percent since the beginning of June. According to one report, its new Dragon Nest title is an emerging blockbuster after adding more than 400,000 users since it was released last Thursday.

Also yesterday, rival Chinese gaming stock Changyou popped about 7 percent after reporting strong earnings and forecasting third-quarter results ahead of analysts' forecasts.

Investors may be drawn to the stocks because both trade at less than 8 times forward earnings, even though analyst project double-digit profit growth. Sohu.com also reported strong earnings, although it trades at a higher multiple than GAME or CYOU.

There was also bullish activity in Activision yesterday and NetEase.com last week. The recent activity seems to be a return to a pattern earlier in March, when large upside bets were placed on stocks in the sector before they continued pushing lower.
 
(Chart courtesy of tradeMONSTER)



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: ATVI , CYOU , GAME

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