Like something right out of a hit evening TV show or blockbuster movie, Paramount Skydance (PSKY) chief David Ellison stepped further into the limelight Monday to throw his company’s hat in the ring in pursuit of Warner Bros. Discovery (WBD), which agreed to be acquired by Netflix (NFLX) in an $83 billion deal over the weekend. Ignoring the irony of movies/TV and potential Gordon Gekko/Wolf of Wall Street comparisons, the focus on today’s pulse will look to consolidate the flurry of information that has come out in recent days. PSKY usurped the Warner Bros. board and is trying to appeal to shareholders putting forth a higher acquisition price of $108 billion. PSKY executives have also noted their offer is to purchase Warner Bros. in its entirety versus the Netflix deal, which includes most of Warner Bros. sans the portfolio of cable channels that include the likes of CNN and TNT (Source: New York Times).

Paramount argues that Netflix’s acquisition of the proposed majority of Warner Bros. Discovery, which includes the movie studio and HBO streaming service, would face regulatory challenges as Netflix’s market share within streaming would increase further. Meanwhile, Netflix argues that regulators should view the new company as part of the broader entertainment industry, comparing itself to companies like Youtube, TikTok, Amazon, and Apple. Netflix’s CEO has also intervened, opining that the Paramount Skydance deal would cut jobs, while Netflix will create jobs. Netflix is currently the largest streaming company based on subscribers with roughly 300 million subscribers; compared to HBO Max (120 million subscribers) and Paramount (70 million subscribers). Raymond James noted that more than 70% of HBO Max customers in the US are also Netflix subscribers, though potential Paramount, HBO Max common subscribers were not noted.  (Source: New York Times; BBC).

The initial deal and subsequent hostile takeover attempt have drawn much theatre (pun intended) on Wall Street and within the political realm due to some of the major players involved within the Paramount bid -  Jared Kushner’s firm, Affinity Partners, along with other notables like the Saudi Private Investment Fund and Qatar Investment Authority. But to offer a differing, objective perspective and help weed out some of the noise the point and figure trend charts of the three companies involved are below.

Warner Bros. Discovery (WBD) – Media – WBD moved to a 5 for 5’er TA rating during the summer months prior to the deal finalizing. After a brief sell signal in early October, WBD returned to a buy signal in the latter part of the month at $21 before seeing shares move to recent rally highs at $28, marking the highest chart level since shares began trading in 2022. The recent rally places WBD in overbought territory and above the top of the 10-week trading band, typically a position that shorter-term holders would look to lock in profits. While investors wait for the final word on which deal WBD moves forward with, users should note that Netflix’s offering price is $23.25 per share, while Paramount Skydance’s is $30 per share. Current support on the default chart can be found at $17.50, while support closer to current prices can be found on the more sensitive 0.25 point per box chart at $22.75 and $22.

Netflix (NFLX) – Media – NFLX has maintained a long-term positive trend on its point and figure chart since May 2023, but the stock has been on a sell signal since July. After a fourth sell signal in the latter part of November at $106, shares have fallen to the mid-$90s with recent trading. Prior to the deal’s announcement, NFLX reversed into Os on its peer RS chart, which dropped the stock down to a 3 for 5’er for the first time since early-2024. NFLX remains a hold in most cases, but holders of the stock should note support at $95 and $90, while the bullish support line now resides at $85.

Paramount Skydance (PSKY) – While shares have only been trading since August, PSKY improved to a 3 for 5’er through September before returning to a sell signal in early October. Since then, PSKY saw its market RS chart reverse into Os in late October before action in the past few trading days brought the peer RS chart in Os along with a violation of the bullish support line on the default trend chart. PSKY is now a 0 for 5’er trading below prices seen in September. Support now resides at $13, while the chart low resides at $10.

Markets have been relatively quiet since the start of the fourth quarter with the S&P 500 Index (SPX) gaining 2.36% so far. Volatility has fallen over the last few weeks to near the lowest levels of the year and while breadth has slowly come back into the market, this is still an environment where a handful of names at the top of the indices has carried them higher, a point we touched on in yesterday’s feature (click here for more). While markets have been consolidating and preparing for their next big move, the Fed makes their interest rate decision Wednesday, December 10th, which could be a strong catalyst in either direction. The markets are pricing in a 25 bps cut, but the FOMC’s statements on the economy will likely carry plenty of weight, especially following a period of sparce economic data during the government shutdown. With some data coming out late and others not coming out at all, it’s a difficult time for investors using that data in models which is why it’s a little surprising to see volatility so low. The CBOE SPX Volatility Index (VIX) is charting at 16 on its one-point chart, just a single box from its low for the year.

With all that said, the technical picture for domestic equities is still strong. However, the pace of gains has slowed down and there are plenty of opportunities for volatility expansion over the next few months with implied volatility already low. Given this backdrop, looking to hedge portfolios with ETF options currently is reasonable. For those that need an outline on how to use ETF options please click here. Instead of focusing on the “how to” let’s focus on figuring out a good hedging strategy, so here are some thoughts on how I would proceed if I were putting on a portfolio hedge today. Going out further in time than what one would to hedge through an earnings season would be preferred. With the pause in economic data, it may be a couple of months before the market makes a move on the data with the expected noise. This also allows for more flexibility if the market declines sooner than expected, one could cover the put position for a profit well before expiry. Also, volatility further out is reasonably priced in the May to July timeframe. The image below shows the VIX futures term structure, notice that it begins to flatten off after March. Therefore, looking at the May to July put contracts gives us a few months before volatility decay starts to really kick in and gives us a chance to sell back our puts if the market doesn’t fall.

Secondly, fully hedging the portfolio with at-the-money puts doesn’t make sense for most people given the higher costs than going out-of-the money. Targeting strikes around 5-10% out-of-the-money makes the most sense depending on what you think clients would be comfortable with paying for insurance. Realistically, a five percent decline is to be expected when invested in equities, we want to protect ourselves against steeper declines in the market while still hedging against more severe market outcomes.

Looking at the five-point chart of the SPDR S&P 500 ETF (SPY), $655 is a big support level and if that breaks there is not much support until $620 with the next level of support at $580. $650 is about 5% below current levels, so we’ll target that strike for our puts. For the expiry, we’ll use the June 18th series which costs about $19.30 per contract and would be about 2.8% of the portfolios value if fully hedging. Fully hedging the portfolio may not be necessary, even just hedging half of the portfolio would help immensely if there was a material drawdown. Remember to only hedge what is appropriate. If the market hasn’t shown signs of weakness by March, then it would be a good time to take look at selling back the puts for a loss rather than letting them expire worthless. There is never a perfect time to pay for insurance, but there are better times to pay for it than others.

Daily Option Ideas for December 9, 2025