Unusual Options Activity: Warner Bros. Discovery (WBD)

Media conglomerate Warner Bros. Discovery (WBD) is down about 12 percent over the past year. One trader sees the potential for a rebound in the next two months.

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  • That’s based on the August $17.50 calls. With 53 days until expiration, 9,264 contracts traded compared to a prior open interest of 116, for an 80-fold rise in volume on the trade. The buyer of the calls paid $0.10 to make the bullish bet.

    Shares recently traded for about $12, so the stock would need to rise $5.50, or about 46 percent in the next two months. While Warner Bros. Discovery has a 52-week high of $17.65, a move in-the-money looks unlikely.

    The media giant has missed earnings in each of the last four quarters, with no expectation for any future earnings. Shares trade at about a one-third discount to their book value, and at 0.7 times their price to sales.

    Action to take: Media companies look like an oversold sector at this point, and investors may want to look at the space given current prices. At present, Warner Bros. Discovery does not pay a dividend.

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  • For traders, the August calls are aggressive and unlikely to move in-the-money. But they’re so inexpensive that they could see triple-digit gains from their current prices on a partial move higher in shares. Traders who buy the options should take a quick profit on any jump higher in shares.


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