Bullish Virgin Media (VMED) trade boosts call volume

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Shares of entertainment and communications name Virgin Media Inc. (NASDAQ: VMED ) are underperforming the broad-market weakness so far on the day without any notable news on the company. Call volume on the tape this morning suggests at least one investor was willing to pay up to bet that VMED will reach a new 52-week high during the next month.

At 11:16 a.m. EDT, a block of 5,000 September 22.5 calls changed hands for 50 cents per contract. This price was the ask when the volume hit the tape. Current open interest of these out-of-the-money calls is 812 contracts, indicating the investor most likely initiated this block to open on a bullish bet that VMED shares could rally at least 9% during the near term.

The investor paid a total of $250,000, which represents the maximum loss on this long call trade. This long call trade loses money if the stock is still trading lower than the strike price at expiration, but risk is limited to the premium paid. If the stock climbs higher than the strike but is trading below the breakeven level of $23 (strike price plus the premium paid), the investor takes back some of the debit. Once the stock rallies higher than $23, the investor could theoretically make unlimited profits to the upside.

Remember, this long call trade not only bets on upside but could also capitalize on a spike in volatility. If the price of the calls appreciate with or without a significant move in the stock, the investor could sell the options back and book profits instead of holding them until Sept. 17.

VMED shares dropped 77 cents to $21.06 during morning trading. The stock is trading roughly 6% lower than its 52-week high of $22.45. It's interesting that the investor is not only betting on a rally in the shares, but also expects VMED to hit a new 52-week high during the next month.



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.



This article appears in: Investing , Options

Referenced Stocks: VMED

Karla Yeh

Karla Yeh

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