Take-Two Interactive Software reported strong earnings after the bell yesterday, and some traders seemed to know that good news was coming.
With less than an hour remaining before the close, optionMONSTER's Heat Seeker tracking system detected heavy buying of both calls and shares in the video-game publisher, whose titles include "Grand Theft Auto" and "Mafia II."
Investors bid up the December 12.50 calls from $0.20 to $0.40 at the same time that the shares rose less than $0.10, which reflects the heavy demand.
The calls traded more than 4,200 contracts. It's not clear whether the buyers were opening new
long positions or closing existing short positions because volume was below open interest.
TTWO ended the session down 0.5 percent at $11.94. The stock has climbed 44 percent since the beginning of September, when it gapped higher on strong fourth-quarter guidance.
The stock rallied another 6 percent in extended trading yesterday after results crushed forecasts: Per-share earnings were $0.58, versus the $0.31 estimate, while revenue surged to $373.7 million--15 percent more than expected.
TTWO has faced resistance around $12.50 since late 2008. If it breaks that level in regular trading, some chart watchers may expect a big rally.
Short interest represented a hefty 25 percent of the float at the end of November, so the late-session bullish activity may have been the work of a bear looking to hedge a bet against the stock.
Overall option volume in TTWO was 20 times greater than average, according to the Heat Seeker. Calls accounted for about 72 percent of the activity.
(Chart courtesy of tradeMONSTER)
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