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.