Options Trader Braves Volatility in Media Giant


Damn the volatility — full speed ahead.

That seemed to be the message from one big options trader in Comcast (CMCSA) yesterday:

  • A block of 5,669 23-November 35 puts was bought in the middle of the afternoon for just $0.02. Volume was below open interest, which suggests an existing short position was closed.
  • At the same second, 8,219 December 35 puts were sold for $0.51. This time, a larger position was opened.

The trade seems to reflect confidence the world’s biggest entertainment company will hold its ground, even if the rest of the market remains under pressure. It works because short puts generate premium now, in return for the trader being willing to buy the stock at a certain price over a certain time frame.

In this case, they’re willing to buy CMCSA for $35 if it’s under that level on December 21, the third Friday in the expiration month. Above $35, they keep the $0.51 as profit, and under it they face the potential for sharp losses. (See our Knowledge Center for more on the risks of put selling.)

Comcast (CMCSA) chart with Golden Cross.

CMCSA fell 3.70 percent to $36.76 yesterday but is up 3 percent in the last month. That places it well ahead of the broader market. Most of the gains followed a strong quarterly report on October 25, when earnings, revenue and subscriptions beat estimates.

Chart watchers may also notice its 50-day moving average recently rose above its 200-day moving average. That puts it in a similar bucket with other large “boring” companies like McDonald’s (MCD), Johnson & Johnson (JNJ) and Starbucks (SBUX) that have pushed higher recently despite a selloff in the Nasdaq-100.

Disclosure: This post is intended for educational purposes only and shouldn’t be interpreted as a trade recommendation. Options trading may not be suitable for all investors.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.