Unusual Options Activity: Discovery (DISCK)

Shares of media firm Discovery (DISCK) have been trending down over the last month. However, one trader sees the potential for a big return over the next year.

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  • That’s based on the January 2023 $40 calls. With 494 days until expiration, over 5,000 contracts traded, a 12-fold rise in volume from the prior open interest of 407 contracts. The buyer of the calls paid about $2.08 to make the trade.

    Shares of the company last traded just over $25 per share, so the stock would need to rise $15, or about 60 percent, for the option to move in-the-money by expiration.

    The company saw shares rally hard last year with other media plays, before the Archegos fund blew up and caused shares to decline. Even with its massive decline, shares are still up 22 percent over the past year, but have a 52-week high of over $66.

    Action to take: Earnings and revenue are growing at double-digit rates, and shares trade at 9 times forward earnings. While the stock doesn’t pay a dividend, there’s still a lot of room for more upside.

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  • Traders and investors alike may like the options trade, given how long shares have to play out. If shares manage to flip to the upside over the next few months, the option may not move in-the-money, but traders could certainly see high-double to low-triple-digit gains.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.