ViacomCBS Inc VIAC 1.02% stock has failed to rebound significantly following a four-day sell-off that saw Viacom plummet over 60%.Enter your text here...
The sell-off is attributed to hedge fund Archegos Capital Management liquidating its position. ViacomCBS, like a number of media stocks such as Discovery Communications Inc DISCA 0.35%
and Music Entertainment Group TME 1.76%, have also been the targets of traders in the r/WallStreetBets community who see the hedge fund liquidation as another financial assault against retail traders.
ViacomCBS option traders may be betting other hedge funds and banks will be looking to build a position in these beaten-down stocks over the next weeks and months at discounted prices.
The ViacomCBS Trades: At 9:40 a.m. Thursday, a trader executed a call block of 485 ViacomCBS options with a $40 strike price expiring on April 16. The trade represented a $293,400 bullish bet for which the trader paid $6.05 per option contract.
At 10:27 a.m., a trader executed a call sweep of 211 ViacomCBS options with a $47 strike price expiring on June 18. The trade represented a $104,500 bullish bet for which the trader paid $4.95 per option contract.
At 11:21 a.m., a trader executed a call sweep of 600 ViacomCBS options with a $40 strike price expiring on April 16. The trade represented a $297,000 bullish bet for which the trader paid $4.95 per option contract.
These traders are betting almost $694,900 on the share price of ViacomCBS going higher.
Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price.
A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.
These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.
When a block trade occurs, it indicates a hedge fund or institution has taken an options position.
A block trade always involves large sizing and is typically handled by a blockhouse outside of the open market. Because block trades don’t occur on the open market, the large size of the trades doesn’t create volatility in the stock being traded.
Like sweepers, block trades indicate “smart money” has entered a position.
The ViacomCBS Perspective: For fundamental traders, ViacomCBS stock may have further downside risk. Following the ViacomCBS sell-off BofA Securities analyst Jessica Reif Ehrlich weighed in on the media stock, warning the rout may not be over.
As both ViacomCBS and Discovery pivot their models from pay TV to streaming, the companies could incur costs that lower revenue in the near term.
For technical traders, the sell-off looks overdone.
ViacomCBS is oversold on both the four-hour and daily time frames and has been trading in a consolidation pattern in the last four trading sessions, closing above the daily support at $45 each day. Option traders may be betting that a bounce is on the way, even if it's only a temporary one.
VIAC Price Action: Shares of ViacomCBS lost 1.02% in Thursday's session, closing at $44.64.