How to play Activision Blizzard stock rally into earnings

One of the hottest video game stocks is gearing up to report next week.

Activision Blizzard, set to report on Tuesday, has rallied 39% this year. For comparison, the S&P 500 has risen just 1%.

Todd Gordon, managing director of Ascent Wealth Partners, sees tailwinds that should propel Activision even higher.

“Video games are increasingly appealing to older demographics; we have a slow restart to Hollywood’s film production; content creators like Netflix are reaching deep into their content pit, and video game companies will see increased demand if Hollywood production continues to remain stifled,” Gordon told CNBC’s “Trading Nation” on Thursday.

Activision produces popular franchises including Call of Duty, World of Warcraft and Overwatch.

“As we look at the chart here, I like the resistance level that we’re looking at here, right around $85 … We really like this trend, leading into earnings like this, especially in the new stay-at-home, work-at-home environment,” said Gordon.

“If you want to own the stock, it certainly seems to be a good idea heading into earnings. If you want to do an options play, here’s something that I have teed up for you here — going out to the September monthlies, buying the 82.5 call, selling the 87.5 call,” said Gordon.

That $5 spread expiring Sept. 18 costs roughly $1.90, said Gordon, explaining that “it’s $190 max risk, potentially [to] make $310.”

Activision closed Friday at $82.63. 

Disclosure: Ascent Wealth Partners holds Activision Blizzard. 

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