What's With The Block Trades In Zynga?

Zynga Inc ZNGA shares saw some extremely unusual volume Monday.

Around 16.5 million shares of common stock traded during the session, compared to its previous 30-day average volume of under 7 million shares.

Making the volume that much more notable, a handful of block trades were noticed, to the tune of nearly 6 million shares over the course of Monday's session.

As highlighted by Benzinga Pro, four block trades near or over the 1 million share threshold were tracked, each around the price of $2.80.

Following the block trade activity, Zynga shares closed at $2.79.

What Is A Block Trade?

A block trade occurs when a large investor -- most often on the institutional level -- wants to buy or sell a large chunk of a security at a pre-arranged price. In order to clump the shares together and come to an agreement on the price, an investment bank is normally a requirement for doing such a transaction -- rather than the investor finding and buying the shares out in the open market.

What Does Seeing A Block Trade Mean For My Investment/Trade?

Block trades can be incorporated into an investor's strategy as an indication of activity in the name.

Using a block trade for gleaning bullishness or bearishness isn't advisable; if the banker on the deal is good at his or her job, market players shouldn't be able to tell if the order came from a buy or sale as the agreed-upon price for the block trade should be appropriate to the current price the stock is actively trading at.

Instead, consider block trades as a way to gauge liquidity in a stock.

In the case of Zynga, it's safe to say investors and traders are showing an unusual level of interest in the name -- for whatever reason.

Image: Vladislav Bezrukov, Flickr

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