Liberty Global faces range-bound trade


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Is Liberty Global going higher or lower? Not much of either, if one big investor is right.

optionMONSTER's tracking systems detected the sale of 10,000 October 27.50 puts for $0.70 and a matching number of October 32.50 calls for $0.35, resulting in a total credit of $1.05. There was no open interest in either strike before the transaction priced.

LBTYA Chart LBTYA fell 0.61 percent to $29.53 yesterday. The provider of voice, video, and Internet services in foreign countries is up 12 percent in the last month but is now stalling at the same $30 level where it peaked in April. It was also where the stock was valued in September 2008, immediately before panic swept the financial system.

Given the long-term importance of this price area on the chart, traders may expect LBTYA to move sideways for an extended period before continuing higher. Yesterday's option trade, a short strangle, is designed to earn income from the shares doing precisely that.

The investor will make the most money if the stock stays between $27.50 and $32.50 through expiration. However, thanks to the premium already earned, they're protected all the way down the $26.45 and up to $33.55. (See our Education section)

The trade came one day after the company reported second-quarter results that appeared to be slightly worse than analysts had predicted. The strangle pushed total options volume in LBTYA to 8 times greater than average.

(Chart courtesy of tradeMONSTER)

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

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This article appears in: Investing , Options

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