Gunnar Wiedenfels, CFO of Discovery Inc (DISCA) bought 40,000 shares of the company last month. The buy increased his holdings by 400 percent, and occurred right before a hedge fund implosion triggered a selloff in shares.
Over the past year, company insiders have been net sellers of shares, as the company went from a price in the low $20 range into the $80 range before its selloff. Prior to the surge in the past year, insiders and sellers have generally been more even.
Overall, company insiders own over 2.8 percent of shares.
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Even with the recent drop in price that cut the share price in half in recent weeks, the company is still up 88 percent in the past year.
Action to take: Shares seem to have stopped falling and have started to find support in the low $40 range. While a further selloff is always possible in any stock, the end of the drop is a sign that a recovery is likely to occur in the coming weeks, even if it’s only partial in nature.
As shares don’t pay a dividend, an options trade looks like the best bet here. The October $45 calls, last trading for about $4.10, offer decent upside return potential on a move higher in shares.
Traders should look for high double-digit returns with the trade, and look to cash out well ahead of the option’s expiration to avoid declining time premium.
Disclosure: The author of this article has no position in the stock mentioned here, and has no intention of starting a position in the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.