Market Insights

If you’ve ever wondered about bulls chasing a Fox, look no further than the activity yesterday’s options market.

And no, we’re not talking about a rerun of Downton Abbey. We’re talking about the big spike of options activity in media conglomerate Twenty-First Century Fox (FOXA).

It hit less than an hour into the session, with 2,336 April 35 calls sold for $1.30 and an equal number of July 35 calls bought for $2.85. A few minutes later the trade was repeated in bigger size, lifting total volume at both strikes to over 6,500 contracts. Volume was below open interest in the April calls, which suggests an existing long position was closed and rolled forward in time. Here’s what it likely means:

• Remember that calls fix the price where a security can be purchased, so they tend to make money when shares rally. See our Knowledge Center for more.
• Volume was below open interest in the April contracts, which suggests an existing position was closed and rolled forward to July.
• Remember also that options expire, with those April calls going bye-bye on April 20. They were barely in the money on Wednesday, so rolling to July protects them from getting rendered worthless by a near-term drop.
• The net cost of the transaction was $1.55. Paying that debit now bought the investor an additional three months of upside exposure. It’ll also give them a taste of the next earnings report in May.

FOXA rose 0.14 percent to $36.19. It’s drifted its current range all year, despite a flurry of merger offers and counter-offers involving Walt Disney (DIS), Comcast (CMCSA) and Britain’s Sky.

Total option volume in FOXA was 6 times average yesterday, with calls outnumbering puts by a bullish 92-to-1 ratio.