A big spike in options volatility premiums is taking place today in Take-Two Interactive Software (NASDAQ: TTWO). The options premiums for TTWO shares have jumped up in value to show that traders are pricing in a potentially huge move in the stock.
For instance, the March 2019, calls on TTWO are trading with an implied volatility of over 40%. Take-Two Interactive Software reports earnings in two days so it could be that the people buying options on it are expecting a big price move in the stock after the earnings announcement.
It could also be that the recent declines in the stock market in the past few days are causing an increase in options hedging with TTWO also. The stock itself has taken a big hit since making a new 52-week high last week on the technical analysis chart.
Take-Two Interactive publishes popular gaming products, such as Grand Theft Auto, Max Payne, Midnight Club, and Red Dead. It has been one of the top gaining stocks in the stock market for the past twelve months and is now trading with a P/E over 73 and P/S ratio over 7.
Such high valuations can make a stock vulnerable to a sudden pullback such as what happened with Facebook (NASDAQ: FB) last week in a “teardrop” stock drop. We are also seeing a jump in options activity in Marvell Technology Group.
