Candy Crush Saga got well… crushed but is it a sweet trade?

Stocks are shaking off just about everything at this point such as Iraq, Iran, Ukraine, Syria and of course that paradise on the Med, the Gaza Strip.  Slow growth in Europe, who cares.  WMT swamped in health care costs, take it up.  Volatility, well just sell the crap out of it.  VIX is now deep into the 12 handle and we might sniff 11% tomorrow.

What the market does not like is a potential one hit wonder.  And the big KING now comes to mind.  If you get those annoying “join the Candy Crush Saga” on your iPhone you know what I mean.  The company worried folks on revenue and everyone hit the bricks.  Then the company declared a big special dividend and told the top holders in the lockup that they will stay locked up for another 6 months.


LivevolX (r)

That was not enough to boost the stock yesterday but it was enough to keep it from going south.  KING, unlike ZNGA, is a bit better managed at the IPO and the company is still very profitable.  I think a trade that rides the special dividend will work out ok.  Even if the little alerts are annoying, enough folks like them to generate decent revenue.

The Trade

Selling the KING Sep 14 puts and buying a Nov 12 put might work out ok.  Make sure you get a nice credit.  There is no term structure edge but you do get to own the earnings month for the next time.

I will be at the Money Show on Sep 12th:

Be my guest at the All-Stars of Options Trading at the Mariott Marquis Times Square inNew York City. You will have the opportunity to get up close and personal with the country's top professional options traders. LIVE two-day in-depth program for options traders begins September 11.

You can also enjoy a once-in-a-lifetime experience, along with your education, with an exclusive reception on the world-famous trading floor of the New York Stock Exchange.


Register today!

Follow Mark on twitter @optionpit

Follow Andrew on twitter @optionvol




Blog Image: