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.
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)
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