Video game maker TakeTwo (TTWO) reports fiscal Q4 results Monday after the close. The options market is implying a 7% one day move which is inline with the 4 qtr avg move.
The stock caught my eye as the price action over the last 6 months, and the technicals are pretty interesting. The stock is down 12% on the year, and down 20% after making a new all time high in January, possibly putting in place an epic double top:
On a shorter term chart, the pullback to last year’s breakout level of $24 looks to be an obvious level of support. But I would add that the formation of the death cross, the 50 day moving average (purple line), crossing below its 200 day moving average (yellow line) could be a troubling sign:
The recent rise in options prices (while not a surprise into an earnings event) shows the widening gap between low levels of realized volatility (white line below, how much the underlying has been moving) and implied volatility (blue line). This is interesting to me given the stock’s large decline from the highs, the stock has recently ground to a halt over the last month making a base above $24, possibly creating the potential for a large move one way or the other:[caption id="attachment_53696" align="aligncenter" width="600"] TTWO 1yr chart of 30 day at the money IV (blue) vs Realized Vol (white) from Bloomberg[/caption]
With the deteriorating technical set up, if I had a convicted fundamental bearish thesis (which I don’t), I would play for a breakdown by buying the June 24 puts, offered at $1.05 (stock reference $24.65). Thise break-even at $22.95, down 7%. While that seems a like a lot of premium, if you got the direction and the magnitude of the move right, this would be the right way to play. But those are some big ifs, and as always we try to shy away from short dated long premium trades into events like earnings. We will check back on this prior to the event.