Someone apparently sees Sprint Nextel as the next comeback kid.
Our tracking systems detected the purchase of 77,000 January 2014 3
calls for $0.65 and the sale of 77,000 January 2014 5 calls for
$0.22. Volume was more than 10 times open interest in each strike,
and it was the largest transaction in the entire market yesterday.
Buying those 3 calls locks in a $3 entry price on the stock for the
next 1-1/2 years while selling the 5 calls locks in a sale price of
$5 over the same period. The trader paid $0.43 to own that spread,
which would translate into a profit of 360 percent on a move back
S rose 0.74 percent yesterday to close at $2.74. The stock would
have to almost double for that
bullish call spread
to reach its maximum value, but given how much more the trade could
make on a percentage basis, one can see the kind of leverage that
options can provide.
The drawback of the strategy is that if the debt-laden wireless
company fails to rally, the entire position will expire worthless.
Total option volume in S was 15 times greater than average
yesterday, with calls outnumbering puts by a bullish 41-to-1 ratio.
(A version of this post appeared on
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