Another old love, PARA may be getting away from us as they are merging with Showtime and predicting $700M in cost savings and now rumors are swirling that they will be bought for $30Bn by NFLX or someone else – which is exactly what I predicted would happen but I said $20Bn, not $30Bn – which seems a bit much as they are now $10Bn at $15.85.
Anyway, they do, in fact make $500M but have made over $1Bn in the past and $700M in cost cuts ($30Bn in sales) should do the trick. I’m not going to do a big write-up as I’ve been banging the table on them since $20 and here we are at $15 – buying them again for the LTP:
- Sell 10 PARA 2025 $20 puts for $5.85 ($5,850)
- Buy 25 PARA 2025 $15 calls for $4.65 ($11,625)
- Sell 25 PARA 2025 $22.50 calls for $2.20 ($5,500)
That’s net $275 on the $18,750 spread that’s $2,500 in the money with $18,475 (6,718%) upside potential at $22.50 and, if they do get bought, instant profits! If not, we’re fine if they drift along and we’ll roll the puts along or whatever. If they go lower – still a good value stock to sell calls against.
Worst case is owning 1,000 shares at $20 ($20,275) – not going to kill us so a very easy add to our $500,000 LTP.
