Sector Showdown: Entertainment Stocks

Good morning, Power Profit Traders!

Make sure you’re in this room at 9:30 a.m. ET sharp, where I’ll dive into what’s on my radar at the open.

Maybe we’ll talk trade ideas based off of some interesting Money Calendar patterns I’ve spotted this week…

Perhaps I’ll discuss the cryptocurrency INSANITY we’re about to witness, and the SEC decision that surprised me (in a good way)…

Or maybe I’ll just perfect my Cardi B impression, as I know many of you got a kick out of that last week – LOL.

The only way to know — and perhaps use that knowledge to make money on your own, which is always my goal — is to be in the room at 9:30 a.m.!

In the meantime, however, I want to break down something interesting I saw last night in my Morning Report tool, which is free to my Power Profit Traders via the TG Suite app. (Instructions how to download and use found here.)

Specifically, I witnessed a dichotomy you don’t see too often in the option pits…

Two stocks in the same sector, going the same general direction — yet attracting polar-opposite bets among options traders.

So today, let’s dive into the Sector Battle I’m seeing in the Entertainment neighborhood.

One Sector, Two Polarizing Option Trades

The situation I’m alluding to regards two stocks in the Communications sector — particularly, in the entertainment world: Comcast (CMCSA) and ViacomCBS (VIAC).

Both companies have already reported quarterly earnings for the season, and both stocks have been trending lower over the past several weeks.

CMCSA has been stair-stepping lower since briefly topping $60 in late August/early September, closing yesterday around $53…

CMCSA chart courtesy of Morning Report

And while it’s been a less choppy downturn for VIAC shares, it’s been a downturn nonetheless.

The shares have dropped more than 10 points since their late-June highs, closing yesterday at $35.15, and it’s hard to believe this former “meme stock” briefly topped the century mark back in March.

VIAC chart courtesy of Morning Report

So I found it interesting that Comcast stock emerged on today’s Unusually High Call Option Volume list, indicating a bullish bias, while VIAC landed on the Unusually High Put Option Volume list, pointing to a bearish bias.

Specifically, CMCSA’s at-the-money (ATM) December $52.50-strike call was popular yesterday.

Buyers of the calls expect Comcast shares to rebound and move north of $52.50 before the standard monthly options expire on Friday, Dec. 17.

On the flip side, VIAC’s $42.50-strike put expiring Jan. 21, 2022 was No. 1 on its respective list.

With VIAC shares trading around $35, these puts are already more than 7 points in the money (ITM), which explains why the contract price on the Put Volume list was a healthy $8.

Buyers of the puts expect ViacomCBS stock to extend its decline south of the $42.50 level into the new year.

It’s entirely possible that both of these trades work out, due to the difference in times to expiration, but this is an interesting study and goes against what we usually see, which is, “When one stock in the sector gets the measles, they all do.

In this case, it looks like these two were quarantined.

Now… get in the room at 9:30 a.m. ET and I’ll see you there!

Tom Gentile

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