CBS has rallied back to its highest level since early 2008, and
one investor is hedging against a pullback.
optionMONSTER's Depth Charge tracking system detected the purchase
of 2,000 June 23 puts for $1.30. Equal-sized blocks in the June 26
calls and the June 21 puts were sold at the same time for $0.90 and
$0.40, respectively, which reduced the cost of the trade to zero.
The resulting position will earn a maximum profit of $2 if CBS
closes at $21 on expiration. It was probably the work of a
shareholder who wants to protect against a drop and is willing to
be forced to exit their position for $26 if the media stock returns
to that level.
CBS rose 0.35 percent to $24.40 in morning trading. It rallied more
than 50 percent between late October and late March, when it peaked
at $26.17, but has been drifting lower since.
The rally occurred as investors priced in a stronger advertising
market. In addition to its namesake television and radio stations,
CBS owns billboards and Simon & Shuster publishing. The next
earnings report is scheduled for after the bell on May 3.
Shortly after the bearish three-way June trade, a block of 2,000
May 25 calls was sold for $0.90. Volume was below open interest, so
it may have resulted from a bullish investor separately exiting a
long position. Regardless, it bolsters the expectation that upside
is limited over the near term.
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