CBS has been moving sideways since October, and now one investor
is making a lost-cost, low-risk bet it will rally by early next
optionMONSTER's Heat Seeker tracking system detected the purchase
of 6,600 January 17.50 calls for $0.35 and the sale of a matching
number of January 10 calls for $0.475. The trade pushed total
option volume in the media conglomerate to 11 times greater than
CBS fell 1.40 percent to $13.42 yesterday and has been trading
on either side of $14 for the last 10 months. In early May it
peaked $0.02 below $17 -- its highest price since immediately
before the stock market collapsed in late 2008.
Monday's option strategy is apparently a bet the stock will
return to the top end of the recent range. If it does, it will
drive up the value of the calls owned and reduce the value of the
puts sold short. The investor has unlimited potential profits if
CBS rallies over $17.
He or she will suffer losses if it closes below $10 on
expiration. Given the wide range before they either make or lose
money, the strategy appears to be a low-risk bullish wager.
The trade appeared after the stock held the $13.30 level which
has provided support since late May. Some chart watchers may think
the shares are basing here and setting up for a push higher.
CBS reported better-than-expected second-quarter results on Aug.
3, fueled by a recovery in advertising revenue. The trend toward
improvement in the industry has been seen in related companies
including Time Warner and Interpublic Group.
(Chart courtesy of tradeMONSTER)
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