For the second time in a week, one investor is swinging for the
fences with MetroPCS Communications.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 30,000 November 8 calls for $0.85. Equal-sized blocks were sold
in the November 5 puts for $0.45 and the November 10 calls for
$0.35. Volume was more than 200 times open interest at all three
strikes. The trade cost just $0.05 to open and is highly leveraged
to upside in the stock price.
The position will earn a maximum profit of 3,900 percent if PCS
closes at or above $10 on expiration. The investor will also be
forced to buy shares for $5 if they close below that level on
expiration, which creates the danger of losses to the downside.
Similar activity occurred
in the August options, with the 6 puts and 10 calls sold the 8
calls bought. Both strategies combine elements of
. (See our
PCS is down 3.69 percent to $6.78 today and has lost more than 30
percent of its value in the last three months. After a few quarters
of strong growth in 2010 and 2011, the prepaid wireless company has
struggled since last summer as customers melt away. But now that
the shares have returned to their lowest level in two years, and
some news reports have speculated that the company is a takeover
Overall option volume in the name is 10 times greater than average
so far today, according to the Heat Seeker.
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