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DISH Network Corp (DISH) Continues Its Push to New Highs

Short-term option bulls bet on additional upside for DISH

by 7/1/2013 12:08 PM
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The Street continues to look favorably upon DISH Network Corp (NASDAQ:DISH), in the wake of the company's decision to end its pursuit of Clearwire Corporation (NASDAQ:CLWR). The stock pegged a new peak today of $43.34 -- its highest level since October 2000 -- and is now trading at the $43.14 mark. Today's strong price action has inspired bullish speculators to crowd the options pits -- nearly 7,200 calls have already changed hands, representing a 50% mark-up to what is typically seen on an intraday basis. By contrast, fewer than 3,000 puts have changed hands.

Roughly half of this call volume crossed at the July 45 strike, where close to 3,900 positions have traded, exceeding existing open interest. Two blocks of 1,880 contracts went off near the ask price, and implied volatility has risen by 2.2 percentage points, suggesting buy-to-open demand for this front-month, out-of-the-money play.

The option bulls scooped up these calls for a volume-weighted average price (VWAP) of $0.67, meaning the breakeven price at expiration -- all other things being equal -- is $45.67. This is 5.9% above current levels, and would represent another new 12.5-year high.

DISH shares are up roughly 51% during the last 52 weeks, having jumped more than 10% over the last six sessions. In response, DISH Network Corp (NASDAQ:DISH) has been favored by call buyers during recent days. The stock's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 8.28, indicating that calls have been purchased to open over puts at a greater than 8-to-1 margin during the last two weeks. In fact, this ratio stands in the top one-fifth of the past year's readings, suggesting above-average demand for long call options.

The brokerage bunch has been less quick to board the bullish bandwagon. The consensus 12-month price target for DISH is $42.56, or below the equity's current price. Also, just five of the 11 brokers following the stock name it a "buy" or better, leaving six "hold" ratings. Any future upgrades and/or price-target hikes could help DISH muscle even higher -- and help recent call buyers on their quest for profitability.


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