Madison Square Garden Sports Put Volume Hits One-Year High Ahead of Rangers Spin-Off

Madison Square Garden Sports Corp. (NYSE: MSGS) experienced a significant surge in bearish options activity on Thursday, with put volume reaching its highest point in a year. The heightened trading comes as the company's stock fell, reversing earlier gains that followed the board's approval for the planned spin-off of the New York Rangers hockey team.

Options Data Shows Bearish Positioning

Options traders were overwhelmingly focused on puts, which grant the right to sell a stock at a set price. According to Bloomberg data, put volume reached 1,906 contracts compared to just 197 calls, resulting in a put-to-call ratio of nearly 10-to-1.

Activity was heavily concentrated on a single contract:

• The November 20 $370 put saw 1,302 contracts traded, vastly exceeding the existing open interest of just 76.
• This high volume relative to open interest strongly suggests the opening of new bearish or protective positions.

The overall put volume was the highest recorded for the stock since October 4, 2023. Despite the heavy put buying, implied volatility metrics showed only a modest increase, suggesting the market is not pricing in extreme price swings or panic.

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Stock Slides Despite Spin-Off Approval

The options activity coincided with a 4.32% drop in MSGS shares, which closed at $387.69. This decline reversed a nearly 2% gain seen in after-hours trading on Wednesday, immediately after the company announced its board had approved the separation of its sports teams.

The spin-off is scheduled to be completed in late October. The record date for shareholders to receive shares in the new MSG Rangers entity is October 20, with the distribution expected on October 26. The new companies will begin regular trading on October 27 under the tickers MSGK and MSGR. Because the active November options expire after this date, their contract terms will be adjusted to reflect the corporate action.

Interpreting the Trade Flow

The surge in put buying could be interpreted in two primary ways. Some investors may be making outright bearish bets, anticipating a "sell the news" event after the stock's strong performance, which includes a year-to-date gain of over 50%. Alternatively, long-term shareholders may be buying the puts as a hedging strategy to protect their significant gains from any potential volatility surrounding the spin-off process.