After a huge run-up in the past couple of years, World Wrestling Entertainment, Inc. (NYSE: WWE) shares have run out of steam since late April, dropping roughly 21% from all-time highs. While some investors are looking to buy the WWE dip, at least one large option trader was throwing in the towel on a WWE rebound on Wednesday.
On Wednesday, Benzinga Pro subscribers received two options alerts related to WWE.
At 10:37 a.m., a trader sold 1,000 WWE call options with a $75 strike price expiring on July 19 at the bid price of $4.35. The trade represented a bearish bet worth $435,000.
Together, the two trades represented more than half a million dollars worth of bearish WWE options trades.
Why It's Important
Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.
Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.
Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively small sizes of the WWE options trades, it’s unlikely they are hedges.
Buy The Dip?
WWE stock has gone on a huge run in recent years thanks to massive new TV deals with Comcast Corporation (NYSE: CMCSA) subsidiary NBC and Fox Corp (NASDAQ: FOX) (NASDAQ: FOXA). Investors have also been anticipating much larger TV deal renewals around the world, including markets like the UK and India.
However, with WWE’s new Fox deal scheduled to kick in this fall and expectations already sky-high for the India and UK deals, Wednesday’s options trader(s) may be betting that the deal announcements and WWE Fox debuts will be sell-the-news events.
In addition, new competitor All Elite Wrestling recently announced a major TV deal with AT&T, Inc. (NYSE: T) to begin airing weekly content on TNT. The AEW deal marks the first time in 20 years WWE will face competition from a rival wrestling promotion on TNT.
Wednesday’s call seller could also believe AEW poses more of a threat to WWE than the market anticipates.
WWE closed Wednesday at $76.93 per share.
How To Read And Trade An Options Alert
Photo credit: Miguel Discart, Flickr
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- Bruised And Battered, But Not Broken: Wall Street Reacts To WWE's Earnings Miss
- WWE's Stock Slammed On Big Q1 Earnings Miss
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