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Lions Gate Entertaiment and Time Warner Cable Trades


From the Buzz & Banter: Trading Comcast's acquisition of Time Warner Cable and Lions Gate distribution of "Divergent."

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

I'm close to calling audibles on two of my current trades, so I thought I'd update readers on my evolving thoughts:

Lions Gate (NYSE:LGF): I last said that I anticipated being out of the stock by the second week of March, which would be just ahead of the March 21 release date for Divergent.

Typically, Lions Gate rises aggressively ahead of key release dates (like for the first two Hunger Games films), at which point expectations peak, and then the stock sells off.

However, I'm starting to have doubts that Divergent is going to be a massive franchise for Lions Gate. This is largely a "feel" issue.

The hype surrounding the first Hunger Games film was quite obvious if you had your eyes open. Even in our e-book-dominated age, I was seeing teens and young adults with the physical books everywhere, and I actually overheard plenty of conversations about the books. The Divergent series is kicking butt on the Amazon (NASDAQ:AMZN) charts, but I'm just not seeing the real-world hype and I fear it could disappoint investors the way Ender's Game did.

So I'm moving up my likely sell window to very early March.

Time Warner Cable (NYSE:TWC): I'm rethinking my long trade in Time Warner Cable. I am still confident its acquisition by Comcast (NASDAQ:CMCSA) will go through. However, I am looking to replace or supplement my long January 2015 $145/$150 long call spread trade.

As it stands now, the position is modestly profitable, and will be very profitable if the deal closes (or investors become more assured it will close) before expiration.

However, if I'd done something more aggressive near term, like shorting the February 2014 $145/$140 put spread, I'd be in a much better position profits-wise, and I'd have better liquidity for possible exits.

So one trade I'm looking at is shorting the March 2014 $140/$145 put spread, which has less maximum profit potential than my current position (about $2 per lot instead of $2.85 per lot), but also a much shorter time horizon, and also the option to roll the trade forward).

I'll update readers should I take action in these names.

Twitter: @MichaelComeau

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Position in LGF, TWC.
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