Cable Companies and Airlines on the move

May 21, 2015
By Vlad Karpel

Yesterday I received an offer from a competitor of my current cable TV provider. Now I am not going to go into the merits of changing cable companies, but it did get me thinking about the space, and specifically what is going on with the cable and media stocks. I found an ETF that tracks media and cable, the PowerShares Dynamic Media Portfolio ($PBS). This is a very illiquid and non-optional ETF. But the holdings are the very companies that are marketing change; Time Warner Inc. ($TWX), DIRECTV ($DTV), and DISH Network Corp. ($DISH).

The ETF has been in a decent range since March, that is until yesterday, when $PBS broke and settled above $27. This has been a solid resistance point all of 2015. Right away I found out why the ETF was on the move to the upside. Time Warner ($TWX) was up over five percent on take over rumors.

What is interesting is $TWX Implied Volatility did not expand at all either in June or July, so the options market at this stage is not forecasting near term violent moves.

I may look at an Iron Condor in July but not until the Implied Volatility expands to 36 – 40 percent levels. It is currently at 26 percent, which is on the lower end of its 52-week range.

Also on the move was Travel and Leisure ($PEJ), specifically Airlines, which were weighting heavily on this segment of the market. Names like Delta ($DAL), Southwest ($LUV), and United Airlines ($UAL), were all down between 5 and 10 percent. This sector does tend to get bearish this time of the year, take a look at the Seasonal charts. The move in Crude ($CLU15) to $60 could be getting traders and investors concerned about near term profits. I will have names in this sector on my watch list for some potential bearish opportunities.

Have a great trading day!

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