Option Trade - Dish Network (DISH)
July 26, 2012

The Changing Face of DISH

**OPTION TRADE: Buy the DISH Sep 2012 30.000 call (DISH120922C00030000) at or under $1.00, good for the day. Place a protective stop limit at $0.30 and a pre-determined sell at $2.00.

by Ian Harvey

July 26, 2012


Satellite television provider Dish Network (NASDAQ: DISH) has been amassing a lot of cash lately. At the end of the first quarter, the company had $2.7 billion in cash, but bond sales have ballooned that total to a massive $5.6 billion, leading analysts to wonder why the company is raising so much cash.

Dish, which is currently the second largest satellite provider behind DirecTV (DTV), has been experiencing a decline in its core business in recent years and is looking to expand into the wireless market. The company has reported lower customer numbers in six of out of the last nine quarters. Not only is Dish struggling to keep its customers from DirecTV and cable providers, it is also facing higher expenses resulting from more expensive programming costs. At the end of the last quarter, Dish announced that it was dropping AMC Networks from its programming list as a result of the network charging too much for its programs.

Dish's intentions to move into the wireless market were made clear when it spent $3 billion for wireless spectrum from DBSD North America Inc. and TerreStar Networks Inc.While the Federal Communications Commission has approved the deal, it has yet to make a decision on Dish's plan to repurpose the spectrum to handle mobile video.

While Dish has yet to make any official announcement on what it plans to do with the cash they have been raising, there is little doubt about which direction Dish is heading. The only real question is how they are planning to proceed.

There are two possibilities the company could pursue. It could either build a wireless network, or acquire another wireless carrier that already has a network in place.

During a May conference call, the company's CEO, Charlie Ergen, told investors that they should expect the company to be conservative in the manner with which they enter the wireless business. The company hopes that the FCC will reach its decision on whether or not to allow Dish to repurpose its recent spectrum acquisition by the end of the summer, and the cash that it has been raising could be its way of assuring the FCC that it has the cash on hand to build its network.

Instead of building its own network, it is much more likely that Dish would acquire, or partner with a smaller carrier. Creating a partnership would probably be its safest bet. Once it has the ability to offer mobile video, it can reach out to a smaller carrier and together they could offer consumer’s video, voice and data all in one package. This is a business model that both AT&T (T) and Verizon (VZ) are moving away from, leaving a gap in the market that Dish could capitalize on with a successful partnership.

One thing is for sure, Dish is looking to change things up. It is facing a changing market place, and consumers are demanding more video on mobile devices. For Dish to remain relevant, it is going to have to break into the wireless market, and it appears as though it is loading up on cash so that when the time is right it will be able to make the moves it feels necessary. The company's current business model is just not going to work moving forward, and it appears to realize this.

Dish Network (DISH) closed Wednesday's trading session at $29.16. In the past year, the stock has hit a 52-week low of $20.89 and 52-week high of $35.64. Dish Network (DISH) stock has been showing support around $28.07 and resistance in the $31.17 range. Technical indicators for the stock are Bullish and S&P gives Dish Network a positive 4 STARS (out of 5) buy rating.

Last week Wells Fargo analyst, Marci Ryvicker, published a note saying he believes the bear case for the satellite TV provider is overblown.

Therefore, based on the facts above the following options trade is recommended.....

**OPTION TRADE: Buy the DISH Sep 2012 30.000 call (DISH120922C00030000) at or under $1.00, good for the day. Place a protective stop limit at $0.30 and a pre-determined sell at $2.00.

”Success is simple. Do what's right, the right way, at the right time.”

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Options traders win because they are successful.

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