Unusual Options Activity: ViacomCBS (VIAC)

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  • Top performing media play ViacomCBS (VIAC) saw a selloff earlier this week as the company announced it would issue more shares to raise capital. With the stock up over five-fold in the past year, some traders are betting on a further pullback.

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  • One such trade is the May $65 puts. Expiring in 57 days, over 7,300 contracts traded against an open interest of 187 contracts, for a 39-fold rise in volume.

    The trader paid about $1.75 for the contract on average. Shares have already fallen from a price near $105 at the peak to under $80 in just a few sessions.

    A move to the $65 strike price of the option would send shares back to where they traded as recently as February.

    Action to take: Shares have had a nearly parabolic move higher in the past few months. The company’s decision to sell shares here to raise capital could keep shares from moving higher in the short-term. This inexpensive put option could also explode in value on a bigger drop in shares.

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  • It looks like a reasonable hedge, as it could provide large upside potential on a down day for the markets. Traders should look for high-double-digit gains or better, and be mindful of the option’s declining time value at this point.