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A Painful Discovery?

While the surge in tech and financials grab the headlines, a rather profound rally has occurred in media land. Look no further than stocks like Disney , CBS and Discovery Communications , which have posted respective gains of 31%, 28% and 35% over the last three months.

AP

And yet today, there was heavy put activity on Discover Communications at the August 20-strike, with over 20,000 contracts trading hands in a single transaction.

But according to "Options Action" star Dan Nathan, those puts were sold, indicating that one investor believes Discovery stock will stay above the $20 by third week of August.

According to Nathan, the investor in questions closed out an existing long position in the options.

"There aren't too many options traders who would sell a $0.15 naked option given the event risk of earnings which fall in August," said Nathan.

Unless of course that investor is supremely confident about Discovery's ability to turn a profit. Either way, protection is not something investors are looking to discover.

Miller Tabak's David Joyce estimates Discovery Communication takes in about $1.7 billion annually in distributions fees, nearly half its revenue.

That built in stream makes them less susceptible to the ebb and flow of add spending. But in that category, Discovery is also doing well.

"They have a unique "edutainment" niche that has proven remarkably resilient to the overall add decline," says Joyce.

"If they guide up on the add side on earnings, it should really drive the stock higher."

And make protection an expensive afterthought.

Questions, comments send them to us at: optionsaction@cnbc.com

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