Thursday, December 10, 2009
Bought Puts on Virgin Media
Virgin Media (Nasdaq: VMED) caught my eye on the Short Screen screener last night. In addition to having an Altman Z"-Score in the distress zone, the company has been losing money for the last four quarters (though those losses have narrowed somewhat over the last three), and has a fairly high debt load (about $9.5 billion in net debt, versus trailing revenue of $6.6 billion and a market cap of about $5.5 billion). Despite that, its share price has rocketed up from a low of $3.76 back in March, to $17 as of last night's close1. A quick search on Twitter showed several bullish tweets on the stock over the last few days, based on its technical trends.
Since Virgin Media has options traded on it, I figured I'd buy puts on it instead of shorting it to cap my downside risk. I bought a few of the Jun 10 put contracts with a $10 strike price (NUDRB.X) this morning for 30 cents each.
1The shares of a number of financially distressed companies have had similarly explosive run-ups from their March lows, including one we mentioned here previously, BAGL.
Update: Perennial contrarian "Commodity" makes the bullish case for VMED in this comment thread on GuruFocus. He could be right, so if you're thinking of going long or short VMED, you may want to check out his comments first.