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Cablevision (NYSE: CVC - option chain) shares are rising today after a feature in Barron's indicated that the company could be an attractive takeover target now that it has decided to spin off New York City sports arena Madison Square Garden and related assets. These assets include MSG Television Network, and the New York Rangers and Knickerbockers. Both teams play at the Garden, which is an arena located in midtown Manhattan. Barron's says that a spin-off of MSG would make Cablevision's balance sheet much more attractive. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CVC.CVC opened this morning at $24.74. So far today the stock has hit a low of $24.40 and a high of $25.00. As of 11:55, CVC is trading at $24.53 up 21 cents (0.9%). The chart for CVC looks neutral and S&P gives CVC a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $20 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in three months as long as CVC is above $20 at December expiration. Cablevision would have to fall by more than 18% before we would start to lose money. Learn more about this type of trade here.
CVC has not been below $20 since July and has shown support around $22 recently.
Brent Archer is an options analyst and writer at Investors Observer.
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. At publication time, Brent neither owns nor controls positions in CVC.
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