On Wednesday, when the stock rose more than 1 percent and options volume ran 10 times its daily average, one trader bet $7.5 million that the Twenty-First Century Fox stock would plunge nearly 30 percent in just 18 months. Specifically, the trader purchased 54,000 of the January 25-strike puts for $1.40 each. Since buying a put option allows one to sell a stock for a set price at a given time, this trade makes money if Twenty-First Century Fox falls below $23.60 by January 2017.
Shares of Twenty-First Century Fox have underperformed the broader market and its peers on a year-to-date basis. The stock is down roughly 15 percent while competitors Disney and CBS are up a respective 18 and 5 percent. Despite the underperformance, some Wall Street analysts see opportunity to profit in the stock.
"Fox is the most-recommended large cap TV network stock," FBR analyst Barton Crockett wrote in a note Wednesday. And according to Crockett, the new leadership change, which is slated to happen on July 1, could "be accompanied by strategy adjustments that improve buy-side sentiment."
Among those changes, wrote Crockett, a potential takeover of Hulu or another streaming service. "Fox, we believe, needs a stronger response, perhaps buying out Disney and Comcast to take over Hulu, to drive a stronger response to Netflix."
Nathan said he doesn't believe the bet was an outright bearish play for Fox to fall 28 percent by January 2017, rather he added, "I suspect this [trade] is a very out-of-the-money protective play against a long position here."
If the trade were to come to fruition, it would put the stock at its lowest level since 2012.
Disclaimer: Comcast is the parent company of NBCUniversal.