Outperforming DISCA Dips After Downgrade

The options pits have been overwhelmingly bearish on the stock

Deputy Editor
Mar 23, 2021 at 10:23 AM
facebook twitter linkedin

The shares of Discovery Communications Inc. (NASDAQ:DISCA) are down 5.5% to trade at $70.52 at last check, after UBS downgraded the stock to "sell" from "neutral." Though the equity is off to a strong start, the firm expects streaming tailwinds to simmer down, and cited the stock's year-over-year outperformance as a challenge for DISCA's current risk/reward profile. However, UBS also hiked its price target to $46 from $24. 

DISCA has been soaring since the start of the year, carving out a clean path of higher highs with help from its 10-day moving average. Today's dip has the equity faltering further from its March 19 record high of $78.14, with the $78 level rejecting the stock during yesterday's trading as well. Year-to-date, the security is up around 130%. 

The brokerage bunch was already quite bearish on DISCA coming into today. Of the 16 analysts in coverage, 12 carried a "hold" or worse rating. Plus, the 12-month consensus price target of $46.80 stands at a 32.2% discount to current levels. 

Sentiment is similar in the options pits, per Discovery Communications stock's 10-day put/call volume ratio of 3.33 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than all but 1% of readings from the past year, indicating a much stronger-than-usual penchant for long puts during the last couple weeks. 

Meanwhile, short interest represents a healthy 29.1% of the stock's available float. In other words, it would take over five days for shorts to buy back these bearish bets at DISCA's average pace of trading. 


Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 



Special Offers from Schaeffer's Trading Partners