Cablevision play bets against selloff
Cablevision dropped on a bad earnings report yesterday, but traders are betting that the move was overdone.
optionMONSTER's tracking programs detected heavy selling in the March 14 puts for $0.40 to $0.48. Almost 11,400 contracts traded against open interest of just 7,102, most of them around the time that April 15 calls were bought for $0.30 to $0.40.
This suggests that at least one big investor was using options to craft a "synthetic" long position, which involves selling puts to generate income used for the purchase of calls . But if CVC closes below $14 on expiration two weeks from now, the trader will have to buy shares at that price.
It's also interesting that the trader bought April calls, which provides another month for a bounce after the puts expire. More than 6,000 of the April 15 calls traded, nearly 7 times previous positioning at the strike. (See our Education section for more on how options can be used to time the market.)
CVC fell 9.57 percent to $13.99 yesterday after reporting a loss of $0.32 a share on revenue of $1.66 billion. Analysts had expected profit of $0.09 and revenue of $1.70 billion. Management also warned that higher programming costs would hurt results going forward.
Despite the bad news, the shares seem to be holding their ground around the same $14 level where they consolidated in November and December. This could make some chart watchers think that support is in place.
Total option volume was 14 times greater than average in the session.
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