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March Put Players Target Lions Gate Entertainment Corp. (USA) (LGF)

However, not all of LGF's put activity was of the bearish variety

by 2/26/2013 9:28 AM
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Lions Gate Entertainment Corp. (USA) (NYSE:LGF - 20.71) saw a considerable spike in put activity on Monday, as more than of 4,700 contracts were exchanged during the course of the session. This was more than six times the norm, and almost triple the number of calls traded. However, it appears that some of these traders employed puts to place neutral-to-bullish bets on the film studio behemoth.

Taking a closer look at the data, the most popular strike by a mile was the March 20 put, where more than 4,300 contracts crossed the tape -- the majority of them at the bid price, suggesting they were sold. These puts changed hands at a volume-weighted average price (VWAP) of $0.15. Meanwhile, open interest at this strike rose by over 1,100 contracts overnight, signaling that some of this volume was comprised of new positions. By selling these puts to open, traders are expecting LGF to stay north of $20 through the close on Friday, March 15, which is when front-month options expire. This would render the options worthless, and allow the speculators to pocket the initial premium received.

Prior to yesterday's uptick in put activity, however, calls were the options of choice on LGF. Per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 20-day call/put volume ratio is docked at 3.06. Or in simpler terms, calls bought to open have more than tripled puts during the last four weeks.

LGF has earned some technical bragging rights lately, boasting a year-to-date gain of more than 26%, as well as a year-over-year advance of around 52%. The shares have outperformed the broader S&P 500 Index (SPX) by over 25 percentage points during the past 40 sessions. In fact, the stock tagged a new record high of $21.15 yesterday. However, should the security sink below $20 prior to March expiration, the put sellers could find themselves at risk for assignment.


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