Unusual Options Activity: Viacom CBS (VIAC)

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  • Media giant Viacom CBS (VIAC) saw shares drop nearly two-thirds during the pandemic. Now largely recovered, at least one trader is betting on a renewed decline.

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  • That’s based on the March 2021 $35 puts. Nearly 14,000 contracts traded against a prior open interest of 254, for a 54-fold rise in volume. The options are also about $3 in-the-money, given the current share price of $32. The option buyer paid about $5.15 per contract.

    Shares of the company have been trading for less than a year, following the merger of Viacom and CBS. Even with that limited trading history, the company trades at about 7 times forward earnings, and just under its price to sales.

    Action to take: It’s hard to see a significant downside in shares here. The in-the-money put sale should move higher dollar for dollar with a drop in shares, but that upside is limited. Traders would be better selling a put option to buy shares at a lower price, or buying a call option to play the long-term trend.

    For put sellers, the March $28 puts are unlikely to be exercised, and can put about $1.95, or $195 per contract, into trader’s pockets.

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  • For call buyers playing the long-term uptrend, the March $35 calls, trading for about $1.90 each, could deliver mid-to-high double-digit returns.