Viacom, Inc. (VIAB) Options Traders Active Ahead of DISH Network Deadline

Viacom, Inc. (VIAB) and DISH Network Corp (DISH) are playing chicken ahead of tomorrow's carriage deal deadline

by Alex Eppstein

Published on Apr 19, 2016 at 2:20 PM
Updated on Jun 24, 2020 at 10:16 AM

Viacom, Inc.'s (NASDAQ:VIAB) options pits are in full swing today, as the entertainment production stock plummets ahead of an expiring carriage deal with DISH Network Corp (NASDAQ:DISH). If a new pact isn't reached by tomorrow, VIAB channels such as Comedy Central and Nickelodeon will no longer be accessible to DISH customers.

Diving right in, Viacom stock has plunged 7.6% to trade at $35.90, and options traders haven't been shy about placing bets -- particularly on the call side of the fence, where intraday volume is at seven times the norm. The most active VIAB strike is the out-of-the-money June 42.50 call, where International Securities Exchange (ISE) data confirms sell-to-open action. By writing these calls to open, the traders are counting on the $42.50 level to stymie any advances by the shares through June options expiration.

Historically, VIAB hasn't toppled that level in over two months. As such, delta on the call is just 0.15 -- down from 0.29 at Monday's close -- suggesting a less than 1-in-6 chance the option will be in the money at expiration.

While the aforementioned options traders are bearish, the brokerage bunch is still banking on a breakout. VIAB's consensus 12-month price target of $46.43 stands at a 29% premium to current levels, and in territory explored during just one session so far this year.

Looking ahead, Viacom, Inc. (NASDAQ:VIAB) is gearing up to report earnings next Thursday morning. Looking back four quarters, these events have tended to favor the bears. Specifically, the stock has sunk three times in the session after its last four reports, with an average return of negative 9.7%.

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