As options expire and roll, what's in Time Warner (TWX) and big media's tea leaves?

The media stocks have not been as exciting as the market of late and Time Warner Inc (NYSE:TWX) is stll down around $18.21. Media stocks used to whip around, up and down, in the market, but now these have become quiet stocks, and if you look at option it doesn't look like there are many cares for more than 60 days. Rupert Murdoch's News Corp. (NYSE:NWS) has seen its shares slide in the last month from over $24.00 to almost $21.00; Sumner Redstone's Viacom Inc. (NYSE:VIA) shares in the last months have slid from $42.00+ to almost $38.00.

When you look at the closest strike prices, you'd think these are going into quiet mode. Time Warner has only 22,000+ of the closest strike prices in calls and 29,000 in puts expiring Friday. Shares closed at $18.21 Thursday so options strike prices won't come into play unless the stock magically moves about 4% in either direction. There are still 24,725 contracts in the open interest for the September $20 Calls, but not even 10,000 contracts in any other strike for next month. As we go farther out there are still 24,112 contracts in the open interest to October 2007's $20 calls and 25,277 for the $22.50 calls. The closest puts for October are the $17.50 puts and those have 21,783 contracts listed in the open interest. In options trading, 10,000 contracts equals 1,000,000 shares on a translated basis, and Time Warner traded over 43 million shares Thursday.

But here is the bright side. The contracts for the $17.50 and $20.00 Calls in January 2008 have over 225,000 contracts carried in the open interest between the two. The same Put strike prices have over 163,000 contracts carried in the open interest. There are even more than 83,000 contracts carried in the $15.00 Puts for Jan-2008. I have pondered what seems to be the most logical path for the future of AOL, and logic would point toward some sort of telegraph being sent to the market by the company over the plans for AOL in 2008. A partial spin-off would give the unit its own currency and it would allow the parent to make acquisitions to boost its position without having to spend hard cash. The company did extend another share buyback plan and Parsons bought more shares personally for his retirement account. The turnaround might not have as many moving parts compared to 2006, but there are some mandated issues coming down the pipe that could start to generate more buzz toward the end of the year. Maybe shares can make that $25.00 mark afterall as some pundits believe.

Jon Ogg is a partner in 24/7 Wall St.; he is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.