Alcatel-Lucent has been bottoming out after a long descent, and
now one investor is betting on a gradual comeback.
optionMONSTER's Heat Seeker tracking system detected the purchase
of 2,000 January 3 calls for $0.35, matched against the sale of
3,000 January 2 puts for $0.13. The trade pushed total options
volume in the telecom-equipment company to seven times greater than
ALU fell 1.82 percent to $2.69 in early afternoon trading and has
lost more than 40 percent of its value since October. However, the
losses have slowed in recent months as the stock finds support
around the same price area where it peaked in the spring of 2009.
The shares have stabilized despite the the company reporting a
wider-than-expected loss on May 9. The Heat Seeker also detected
bullish call buying in early June, a month after put sellers called
a bottom in the shares.
Together, the chart pattern and option action suggests ALU is
bottoming and traders think the next move will be higher.
Today's option transaction is designed to leverage such an outcome.
Selling more puts than calls reduced the investor's cost basis to
$0.155 per call contract owned. The strategy will make money if the
stock rallies above $3 by expiration and generate losses below $2.
The next earnings report is scheduled for July 30.
(Chart courtesy of tradeMONSTER)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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