How one large bull is playing Liberty Global


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Liberty Global has been unstoppable for the last two years, and one investor is looking for more upside.

optionMONSTER's Heat Seeker tracking system detected a surge of activity in the January 50 calls and the January 55 calls, which priced for $1.80, and $0.70 respectively. Volume was below open interest in the 50s and a transaction was canceled in the 55s so there are a few different potential interpretations, but all of them are bullish.

One is that the lower strike was bought and the higher strike was sold. That would have been a bullish call spread, with a net cost of $1.10 and the potential to earn a maximum profit of 355 percent if LBTYA closes at or above $55 on expiration.

Another possibility is that a long position in the 50s were sold and 55s were bought, which would have been a call roll. That trade would have resulted in a credit of $1.10.

A third explanation is that the investor owns shares in the global broadband company and had sold the 50s as part of a covered call and rolled the position to the higher strike. That would let them collect an addition $5 of upside on the stock in return for paying $1.10 now.

LBTYA fell 1.44 percent to $42.99 in early afternoon trading, and is still below that key $50 level where the trades start to make money. It has more than quadrupled since the market bottomed in March 2009, and is approaching its previous all-time high of $45 established in July 2007.

Overall option volume in the name is 133 times greater than average so far today. The call trade accounted for all the activity aside from 2 puts, so the sentiment is clearly bullish.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: LBTYA

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