Long-term play sees Alcatel surviving

By David Russell,

Shutterstock photo

Alcatel-Lucent has endured a near-death experience, and one long-term trade is betting that the company will survive.

The supplier of telecom equipment announced yesterday afternoon that it received a $2.1 billion credit line from Credit Suisse and Goldman Sachs. That gives management more time to cut costs and the match prices of Chinese competitors.

ALU popped 10 percent on the news and is now at $1.21 in morning trading. It's been bouncing in a range since the summer.

Based on the option action, one investor apparently believes that the stock is a safe bet and will at least hold its recent lows. optionMONSTER's tracking systems showed the sale of 9,940 January 2014 1 puts for $0.25 against open interest of 5,945 contracts.

He or she is now on the hook to buy shares for $1 if they fall below that level. But if ALU remains above it, the trader will keep the credit as the contracts expire worthless. Even if they are forced to buy shares, the entry price would be $0.75, including the $0.25 received today.

Total option volume is 15 times greater than average in the company so far today.

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: ALU

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