Barbie / Bratz Wrangle Sends Mattel Volatility, Calls Higher

Mattel (MAT) – With all the unsettling bravura of a Hollywood starlet on trial for misbehavior, it has surely crossed the mind of many a scandalized parent of a doll-loving girl that the prototype of the Bratz doll – the provocatively dressed, collagen-enhanced, brattily named successor to the Barbie mantle – would end up on somebody’s court docket someday. And so it has – though, thankfully, none involving the vice squad.

Instead, the company behind the wildly successful Bratz franchise, MGA Entertainment, is being hauled into court by toymaker Mattel on grounds that the creator of the sassy fashion dolls was employed by Mattel when his first sketches were conceived – making them Mattel’s rightful property. Shares in Mattel responded with restrained upside, up 1.2% to $20.33, but the potential fallout of a courtroom showdown left a more discernible impression in its options.

Implied volatility on all Mattel options rose more than 15%, making it one of the afternoon’s top volatility gainers. Option volume surged to more than 9 times the normal level, with most of the day’s activity concentrated in July 20 calls, which traded to the middle of the market for $1.45, suggesting a whiff of confidence among option traders that the Barbie-maker legal smackdown against the Bratz creator will be successful.