Depending on your political inclinations, Fox Corp (NASDAQ:FOXA), the parent company of Fox News and various other broadcast programs, may either be celebrated or criticized. Fox has undeniably been at the forefront of many contentious political debates, notably the contentious defamation case involving Dominion Voting Systems. Moreover, Fox recently severed ties with conservative firebrand Tucker Carlson, which sent ripples throughout the media landscape.

With another presidential campaign on the horizon, it’s challenging to find someone who doesn’t have a strong opinion about Fox and its role in shaping public discourse. Against this backdrop, FOXA stock emerges as an intriguing prospect for speculative investors, despite suffering a substantial 6.29% loss just last Friday. There are looming uncertainties, but intrepid buyers might spot an attractive discount.

Full disclosure, I had reservations about FOXA stock when the Tucker Carlson news broke. My primary concern revolved around the diminishing relevance of Fox News. Although Carlson never reached the viewership levels of Bill O’Reilly, another Fox News host who departed under shocking circumstances, he managed to appeal to a broad demographic with his populist message.

Losing such a charismatic figure could pose challenges for FOXA stock. It’s not surprising that the Barchart Technical Opinion indicator rates Fox Corp as an 8% sell. Analyst sentiment doesn’t appear overly enthusiastic either. While FOXA does receive a moderate buy rating, with eight holds and one strong sell among 14 analysts, the endorsement doesn’t carry substantial weight.

However, there is a noteworthy development to consider: unusual options activity suggests a potential opportunity in FOXA stock.

Options Market Signals a Potential Opening in FOXA Stock

Following the close of the September 1st session, FOXA stock caught Barchart’s attention with unusual options trading volume. The total volume amounted to 26,566 contracts against an open interest of 42,212. Furthermore, the delta between the Friday session’s volume and the trailing one-month average was a striking 810.11%.

Breaking down the transactions, there were 15,162 call contracts and 11,404 put contracts, resulting in a put/call volume ratio of 0.75, seemingly favoring bullish sentiment. Additionally, the put/call open interest ratio stood at 0.62, reinforcing the optimistic outlook.

While these headline numbers provide some insight, examining Fintel’s options flow data, which filters for significant block trades typically initiated by institutions, offers more context. Notably, there’s substantial open interest in sold $34 puts expiring on October 20, 2023. In this scenario, traders who sold these puts are banking on FOXA reaching or surpassing $34, rendering the puts worthless.

Conversely, there’s considerable open interest in purchased $37 puts expiring on December 15, 2023. This suggests that smart money anticipates FOXA stock rising while still taking precautions.

The intriguing aspect arises from FOXA’s volatility smile, a graph depicting the volatility of FOXA options at various strike prices. At a $20 strike price, implied volatility (IV) registers at 0.89, but at the $45 strike price, it reaches 0.72. Notably, at $23, the IV suddenly drops to 0.50. However, between strike prices of $42 through $44, the IV remains at 0.61 and higher. This suggests that traders may anticipate FOXA stock making a decisive upward move while being cautious due to the high IV at the $20 strike.

Smart Money Signals Confidence

Undoubtedly, FOXA stock is a speculative play. Financially, the underlying company appears to be in decent shape, but the loss of Tucker Carlson casts a shadow over its future. Nonetheless, the volatility smile suggests a bullish sentiment among smart money traders.

The key question remains: Do the fundamentals support a long-term uptrend in FOXA stock? Given the information gleaned from the volatility smile, it appears that traders are making somewhat rational decisions, and their belief in FOXA isn’t solely based on speculation. Despite the popularity of Tucker Carlson and former President Donald Trump, the conservative media ecosystem will need to resonate with audiences in the post-Trump era. Even if Trump wins in 2024, he’ll be ineligible to run in 2028, necessitating a reset in the broader conservative political landscape. Fox News could potentially reclaim its influence in this evolving landscape, making FOXA stock a contender once again.

Featured Image: Unsplash @ Rubaitul Azad

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