Today I bought a call spread on Activision (ATVI), buying the October $12 call options and selling the October $13 calls against them. This is a fairly small trade, less than 1% of my trading account. If the stock ramps, I could triple the amount I put down. I considered making an outright purchase of put options, but decided to play it less aggressively.
Video-game stocks like GameStop (GME) and Take-Two Interactive (TTWO) have been acting pretty well lately, as have related names like Best Buy (BBY). According to my research, sales of recent new games like The Beatles: Rock Band and Guitar Hero 5 are looking pretty good, and pre-order activity for Halo 3: ODST and the new Call of Duty is through the roof.
And just an FYI – I’m holding my put option spreads on AIG (AIG). That stock is dropping like it has an anchor strapped to it. Rather than cash in, I’m content to ride the price action. In fact, I might build an even bigger bearish position using put spreads at lower strikes.