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 The NASDAQ OMX Group, Inc.

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


This article appears in: Investing , Options

Referenced Stocks: LBTYA

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