TiVo dropped on a convertible-debt sale today, but one investor is bullish.
optionMONSTER's Heat Seeker tracking system detected a large multi-part transaction on the digital-recording stock, with 10,000 contracts trading in each of four different strikes.
August 8 calls were bought for $2.53, while August 7 puts were sold for $1.01 and August 15 calls were sold for $0.52. A block of May 20 calls were sold for $0.06.
Volume was below open interest in the May contracts, but more than triple open interest in the August options. That suggests a holding in the May calls was closed and a new three-part strategy expiring three months later was initiated.
Excluding the credit from selling the May calls, the August position cost $1 to implement and will earn a maximum profit of 600 percent if TIVO closes at or above $15 on expiration. It will lose money below $7.
TIVO is down 2.21 percent to $8.86 in early afternoon trading. It fell almost 6 percent early in the session after announcing that it would sell as much as $138 million of convertible notes, a move that will dilute shareholders.
The stock has been wavering for more than a year between negative and positive catalysts. Its earnings, including the last report on March 1, have been poor. But, some traders hope it will win a legal case against EchoStar and Dish Network in a decision expected in April or May. One analyst at Gabelli said TIVO could more than double if it prevails.
Overall option volume in the name is triple the daily average so far today.
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