Bull targets MetroPCS twice in a week

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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 last Thursday in the August options, with the 6 puts and 10 calls sold the 8 calls bought. Both strategies combine elements of put selling with a vertical spread . (See our Education section)

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 target.

Overall option volume in the name is 10 times greater than average so far today, according to the Heat Seeker.



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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This article appears in: Investing , Options

Referenced Stocks: PCS

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