One investor apparently believest that Telefonica will continue
to ring up higher prices.
optionMONSTER's Heat Seeker tracking program detected a bullish
combination trade in the Spanish telecom, which has broad exposure
across Latin America. A block of 2,500 October 14 puts was sold for
$0.20 and an equal number of October 15 calls was purchased for
There are three benefits to the strategy. First, it cost just
$0.15. Secondly, it will let the investor benefit from a quick
rally in the share price while saving them the trouble of buying
250,000 shares on the open market (roughly one-tenth of TEF's
average daily volume).
Third, it programs a purchase order for $14 if the stock closes
below that level on expiration. If it remains in its current range,
the entire position will expire worthless. The main risk is to the
downside because they'll lose money in the event of a big drop.
section for more on
TEF is up 1.45 percent to $14.66 this afternoon and 12 percent in
the last month. The stock fell to an eight-year low over the summer
amid worries about Spain's sovereign debt and negative sentiment
toward emerging markets, but confidence has improved since then.
There was also a similar bullish transaction in Brazilian drinks
earlier in the session.
Overall option volume in TEF is quadruple the daily average in the
name 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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