China Deal Sparks Rush for World Wrestling Entertainment, Inc. (WWE) Call Options

World Wrestling Entertainment, Inc. (NYSE:WWE) inked a deal with PPTV to make further inroads into China

Jun 16, 2016 at 2:54 PM
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World Wrestling Entertainment, Inc. (NYSE:WWE) announced an exclusive, multi-year partnership with PPTV in China, helping WWE stock move 4.3% higher at $18.57. Also benefiting the shares is a price-target hike to $22 at Pacific Crest. The collective developments have sent the stock's volume into the 88th annual percentile, while call options are trading at an accelerated rate, as well.

Though just 440 WWE calls are on the tape, the contracts are still running at double what's expected at this point in the afternoon. Also, call volume has reached the 87th percentile of its annual range. Accounting for more than half of this activity is the June 19 strike, where it appears traders are buying fresh positions -- anticipating WWE will topple $19 by tomorrow's close, when front-month options expire.

Earlier, the stock rallied as high as $18.99. Longer term, though, WWE hasn't settled a session north of $19 since last October. Based on the option's delta of 0.25, the options market is giving the call a 25% chance of an in-the-money finish.

Taking a step back, today's preference for WWE calls over puts represents a significant change of pace. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options traders have bought to open six puts for each call during the past two weeks -- a ratio that outstrips 79% of all others from the prior year.

On top of that, short sellers are anticipating downside from World Wrestling Entertainment, Inc. (NYSE:WWE). Roughly one-quarter of the stock's float is sold short, representing three weeks of pent-up buying power, at the shares' average daily trading volume.

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