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Option Bulls Bombard DISH Network Corp (DISH)

DISH fans pick up May-dated calls as Sprint evaluates a buyout offer

by 4/19/2013 12:23 PM
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The shares of DISH Network Corp (NASDAQ:DISH) are up 1.43% at $38.99, after earlier touching a fresh five-year high of $39.43. Against this backdrop, bullish bets are flying off the shelves in the options pits, with traders nabbing DISH calls at a rapid-fire rate. So far, the equity has seen around 11,000 calls change hands -- more than eight times the norm. For comparison, fewer than 1,800 DISH puts have exchanged.

Attracting the most attention is the May 36 call, which has seen roughly 3,600 contracts cross the tape at a volume-weighted average price (VWAP) of $3.77. All of the calls traded on the ask side, and volume has surpassed open interest at the soon-to-be front-month strike, pointing to a fresh batch of positions.

In order to profit on the play, the buyers need DISH Network Corp to extend its quest for new highs, and muscle atop $39.77 (strike plus premium paid) within the next month. Should DISH slide back beneath the strike before options expiration on Friday, May 17, the most the traders are risking is the initial premium paid for the calls. However, that initial cash outlay isn't chump change; the stock's Schaeffer's Volatility Index (SVI) of 44% ranks in the 74th percentile of its annual range, suggesting DISH's near-term options are relatively pricey right now.

From a sentiment perspective, today's appetite for bullish bets stands in contrast to the growing trend seen on the major exchanges. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.51 registers in the 73rd annual percentile, implying that option buyers have picked up DISH puts over calls at an accelerated clip during the past two weeks.

Fueling DISH higher -- and the subsequent call buying -- were reports that Sprint Nextel Corporation (NYSE:S) has asked a special committee to review Dish's $25.5-billion buyout bid, which trumped Softbank's offer of $20.1 billion. Separately, Dish Network reportedly asked the Federal Communications Commission (FCC) to suspend a review of Softbank's bid in light of its own offer.


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