Investors in Activision Blizzard, Inc. ATVI needs to pay close attention to the stock based on recent moves in the options market. Indeed, the $77.50 put on May 20, 2022 had one of the highest implied volatilities of any equity option today.

What is implied volatility?

Implied volatility shows the magnitude of the movements the market expects in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could also mean that there is an upcoming event that could cause a big rally or a huge sale. However, implied volatility is only one piece of the puzzle when developing an options trading strategy.

What do analysts think?

Clearly, options traders are pricing in a big move for Activision Blizzard stock, but what’s the fundamental picture for the company? Currently, Activision Blizzard is a Zacks Rank #3 (Hold) in the Toys – Games – Hobby industry which ranks in the Top 26% of our Zacks Industry Rankings. In the last 60 days, no analyst raised their earnings estimates for the current quarter, while two analysts revised their estimates lower. The net effect pushed our Zacks consensus estimate for the current quarter from 79 cents per share to 73 cents during this period.

Given what analysts think of Activision Blizzard right now, this huge implied volatility could mean a trade is developing. Often options traders look for options with high levels of implied volatility to sell at premiums. This is a strategy that many seasoned traders use because it captures the breakdown. At expiration, the hope of these traders is that the underlying stock does not move as much as originally expected.

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