Stars Group Inc TSG shares are down 54.4% in the past year, but a series of unusually large options trades Wednesday morning suggests at least one trader thinks the bottom may be near.
The Trades
On Wednesday morning at around 9:02 a.m., Benzinga Pro subscribers were alerted to a purchase of 1,159 Stars Group call options at an $20 strike price that expire Nov. 15. The calls were purchased at the ask price of 94.7 cents and represent a $109,757 bullish bet that Stars Group shares will trade above $20.94 in less than five months' time.
Within 1 minute, likely the same trader purchased an additional 827 of the same call options at the ask price of $1. This second trade represented a $82,700 bullish bet on Stars Group.
At 9:11 a.m., likely the same trader purchased 1,613 of those same Stars Group call options expiring on Nov. 15 at the ask price of $1. This time, the bullish bet was worth $161,300.
All together, the trader bought $353,757 worth of Stars Group call options at or near the ask price within about a 10-minute stretch.
Options Insight
Even traders who focus exclusively on the stock market watch the options market closely to gain insight into what option traders may be thinking.
Due to the relative complexity of the options market, options traders are generally seen as more sophisticated than the typical stock trader. Large options traders are often institutions or wealthy individuals that may have a unique perspective and/or advance information on a given stock.
High Hopes For Fox Partnership?
The bullish option trading in Stars Group suggests the smart money may believe Stars Group and partner Fox Corp FOX FOXA will be big winners from the launch of two new online gambling products this fall.
Stars Group and Fox announced they're teaming up on the new project back in May and plan to launch a nationwide free-to-play sports prediction game with cash prizes, as well as the FOX Bet real money wagering app for users in states with legalized sports gambling.
Stars Group shares didn’t show much reaction to the Fox deal, which could extend up to 25 years and provided Stars with $236 million in exchange for a 5% ownership stake in the company. Wednesday’s call buyer may believe the market is underestimating the potential financial impact of Stars Group and Fox’s new product launches in a fledgling U.S. online sports gambling market.
Unfortunately, there’s no way to be 100% certain whether the buys are a standalone position or a hedge against a larger stock holding. Given the combined value of Wednesday’s trades is under $400,000 in size, they are unlikely to be institutional hedges in this instance.
Stars Group traded around $16.16 per share at time of publication.
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