America Movil (NYSE: AMX) near-term call selling

By Jud Pyle, CFA,

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America Movil S.A.B. de C.V. (NYSE: AMX ) has not announced any news since its earnings report on April 30, but at least one investor traded a hefty number of calls on a bet that shares of the Mexican wireless communications company could experience limited upside throughout the near-term.

AMX closed down 48 cents, or nearly 1%, to $50 on Tuesday. The company announced earnings of 52 cents a share on April 30, and has not announced any news since that date. Options action during Tuesday's session suggests an investor is looking for a ceiling in the stock and calling for implied volatility to come in throughout the next month.

By the end of today's session, more than 8,200 at-the-money ( ATM ) June 50 calls changed hands for an average premium of $2 per contract. These calls were home to open interest of 439 contracts, indicating the majority of the volume was likely initiated to open. It looks like investors sold these options calling for the stock to reach a ceiling at the breakeven price of $52. If the stock remains below this level, the investor could make a maximum profit of the premium paid ($2 per contract). On the other hand, if the stock rallies higher than the breakeven, investors could incur significant losses as the stock moves higher.

A closer look at this action suggests the investor traded these calls with stock, which means the investor most likely put on a volatility play instead of only calling for limited upside. Implied volatility of the June 50 calls is 30% compared to the stock's 30-day historical volatility of 28%. We saw many trades like this today as investors put capital to work in the days following the dramatic increase in implied volatility in the market.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Options
Referenced Stocks: AMX , ATM

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