Today, investors have traded large, unusual volumes of Fox Corp. (FOXA) out-of-the-money put options expiring in one month. FOXA stock is up from its lows after Fox's deal to buy Roku Inc. (ROKU) last month. Investors may be fearful the stock will test its recent lows.
FOXA stock is up flat today at $57.49, but well up from a recent low at $48.65 on June 23. That was after the June 15 announcement by Fox Corp. that it was going to spend around $25 billion to purchase Roku for cash and shares of FOXA.
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FOXA stock - last 6 months - Barchart - July 21 Fox is paying $160 in cash to ROKU shareholders, most of it in cash ($96 per ROKU share) and 0.9693 new FOXA shares per ROKU share. ROKU is at $144.25 today
The market didn't initially like the deal, as it involves Fox Corp taking on $12 billion in new debt, as well as cash on hand, according to the WSJ. After bottoming out at $48.65, FOXA is up 18.8%, almost $10.
This was partly because of a viewership boost from the World Cup. Meanwhile, investors are awaiting Fox's earnings, set to be released in just over two weeks on Aug. 6.
According to Seeking Alpha and Barchart, investors are forecasting $1.33 in earnings per share (EPS) and $1.34, respectively. That would be flat with last quarter, but higher than last year's $1.27 EPS. However, Yahoo! Finance's survey shows an average analyst estimate of $1.37.
However, some investors are not as sanguine, as can be seen in today's unusual put options volume.
Heavy Put Options Volume Today
However, investors in FOXA puts expiring Aug. 21 (two weeks after the upcoming earnings release) have traded over 21 times the prior number of contracts outstanding at the $50.00 strike price.
That price is well below today's price, i.e., out-of-the-money, implying that the buyers expect FOXA stock to crater after the earnings release. This can be seen in the Barchart Unusual Stock Options Activity Report today.
FOXA puts expiring Aug. 21 - Barchart Unusual Stock Options Activity Report - July 21, 2026 However, short-sellers of the puts (i.e., selling the puts to the buyers) get to earn a midpoint premium of $52.50 for the required collateral of $5,000. That works out to a 1.05% one-month yield.
Their collateral will be assigned to buy 100 FOXA shares if the stock hits $50.00 on or before Aug. 21. That implies a drop of 13% or $7.49 from today's price. But even if that occurs, the short-sellers' breakeven buy-in is $49.475, or 13.8% lower.
Investors buying these puts must feel strongly that earnings will disappoint investors. Or they may be betting that investors will sour on the ROKU deal again.
Will FOXA Tank By August 21?
That seems unlikely, at least today. For one, most of the reaction against the Fox-Roku combination, including the dilution effects on FOXA shareholders, is already discounted in the stock.
Second, analysts seem positive on the deal, at least from their price targets (PT). For example, Yahoo! Finance reports that the average PT of 19 analysts is $70.81 and $71.06 at Barchart.
Moreover, AnaChart, which excludes older analyst PTs and tends to track more recent (within the last year) recommendations, reports that the average of 15 analysts is $72.92.
As a result, the average of these three analyst survey PTs is $71.60. That's 24.5% higher than today's price.
However, it's possible the market won't like any updates that management provides on Aug. 6 about the Roku deal. So, investors should be careful in copying this put option activity today.
It might make sense to see where the stock is closer to the August 6 release or shortly after it. At that point, if the one-month OTM short-put yields are still around 1.0%, it could be a great investment opportunity for value investors.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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