Media giant Paramount Global (PARA) has traded flat over the past year, largely trading in a range. Shares are now at the higher end of their range, and one trader is betting on a move lower.
That’s based on the September $10 puts. With 169 days until expiration, 10,762 contracts traded compared to a prior open interest of 315, for a 34-fold rise in volume on the trade. The buyer of the puts paid $1.25 to make the bearish bet.
Paramount shares recently traded for just under $12, so shares would need to drop by $2, or about 17%, for the option to move in-the-money. The $10 strike price is just over the stock’s 52-week range of $9.54.
Over the past year, shares have traded flat, stuck in a range, along with other media companies. The sector has been flat as a whole, with revenues up a scant 4.5%, but with no earnings growth. Paramount looks attractive on a valuation basis at 8 times forward earnings.
Action to take: Given the range-bound nature of shares, the stock may pull back over the coming months. Interested investors can likely get a better price near the $10 range. Paramount also pays a 1.7% dividend at current prices.
For traders, the September $10 puts are reasonably priced for the range-bound nature of shares. The options could see mid-double-digit returns in a normal pullback, but could see higher returns if markets trend lower overall.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.