Wednesday, August 13, 2008

Blizzard deal brings opportunity in The9 Limited (NCTY)

NCTY does online gaming (i.e. MMORPGs) in China. Blizzard is licensing some games to one of The9 Limited (NCTY)'s competitors, NetEase (NTES). This lead to a ~20% drop in NCTY to 18.16. The 52 week low is at 15. P/E is reasonable at 10.

Combined with the recent downturn in the Shanghai composite, this seems like an interesting trade.

When the market opens tomorrow, I am going to look at selling puts at the 15 strike. The Dec 08 15 Put looks interesting at 1.75. A 10% return on risk in 4 months.

I am looking to diversify out of high concentrations in financials so this would be a good fit. Need to do some more due dilligence but definitely interesting.

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