Clearwire plunged last week amid concerns of a cash-crunch, and
one investor is looking for the next shoe to drop.
optionMONSTER's Depth Charge tracking system detected the purchase
of 5,000 June 5 puts for $0.70 and the sale of 10,000 June 4 puts
for $0.30. Volume was more than 7 times open interest in both
CLWR rose 2.32 percent to $6.17 in morning trading. The
high-speed wireless data company issued $1.33 billion of debt on
Thursday. Management also said it might sell off spectrum or bring
in new investors to bolster liquidity.
The news, which is apparently making investors worry about more
capital being raised, has caused the stock to fall to the bottom of
its recent trading range. If it consolidates here, some chart
watchers may expect support to break and new lows to follow.
Today's option trade will earn a maximum profit of 900 percent if
CLWR closes at $4 on expiration. Gains will erode below that level
and turn to losses below $3.
The strategy is known as a ratio spread because the investor sold
twice as many puts as he or she bought. That reduced their cost
basis to just $0.10, but also creates the risk of further losses
below the lower strike.
Overall options volume in the stock is 24 times greater than
average so far today, with puts accounting for 98 percent of the
(Chart courtesy of tradeMONSTER)
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