A large trader apparently thinks that CBS is heading higher.
optionMONSTER's Heat Seeker monitoring program detected activity in the November 17 puts and the November 21 calls, with 5,000 trading in each. There was barely any open interest in either strike before the trade appeared.
The puts were sold for $1 to $1.10, while the calls were bought for about the same price. The resulting position cost essentially nothing to open and is similar to owning shares in the media company. The main difference is that if CBS remains between $17 and $21 through Nov. 18, both calls and puts will expire worthless.
The trade is an example of how investors can use options to create highly leveraged strategies tailored to specific time horizons. In this case, the position will have long exposure in time for the next earnings report the afternoon of Nov. 3. The last time results came out on Aug. 2, CBS crushed estimates thanks to strong ad spending and content distribution deals.
CBS closed at $19.59, up 3.38 percent on the day, but it has lost more than one-third of its value over the last three months.
The bullish trade pushed overall option volume in the name to nearly 6 times greater than average yesterday.
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