XM-Sirius shocker: proposed merger opposed by tradtionional radio

XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) opened at $12.36. So far today the stock has hit a low of $12.02 and a high of $12.40. As of 12:25, XMSR is trading at $12.22, down $0.17 (-1.4%).

After hitting a one year high of 24.21 in almost a full year ago, the stock has been slipping over the past three months. A Carmel Group report on behalf of the National Association of Broadcasters (traditional radio) is expected to be released today, detailing the opposition to the proposed XM - Sirius Satellite Radio Inc. (NASDAQ: SIRI) merger. I get the feeling that no matter what the satellite companies do, the terrestrial radio group will oppose them. Still, this report has been getting some negative press for the two companies. The technical indicators for XMSR have been bearish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $15 range. XMSR has not been above $15 since the SIRI merger was first announced and has shown resistance above $12.60. This trade could be risky if the deal goes through with no trouble, but even if that happens, investor sentiment towards satellite radio could keep this stock below $15.

Brent Archer is an options analyst and writer at Investors Observer. (Free Subscription)

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.