Trader bets on higher SBA volatility

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SBA Communications reports earnings in two weeks, and one trader is looking for a ramp-up in volatility.

optionMONSTER's tracking systems detected the purchase of about 2,200 September 35 calls for $2.35 and a matching number of September 35 puts for $1.55. The trade pushed total options volume in the owner of wireless towers to more the 20 greater than average.

SBAC Chart SBAC rose 4.69 percent to $35.91 in morning trading. It's been moving sideways all year as it fights resistance around the same level where it traded immediately before the 2008 stock-market panic.

Today's option trade, known as a long straddle, anticipates a move outside the recent trading range. It cost $2.90 to implement and will make money if SBAC falls below $32.10 or rallies above $37.90 by expiration. (See our Education section)

The strategy will also profit if implied volatility increases, which would drive up option premiums. Implied volatility on SBAC now stands at about 32 percent and has been slowly inching higher since March, when touched 29 percent--the lowest level in at least three years.
 
The trade could make sense because the release of second-quarter earnings is scheduled for the premarket on Aug. 3, and implied volatility often climbs shortly before earnings. The company reported a wider-than-expected loss the last time it published results on May 4.

Investors also bought about 1,400 August 35 calls for $1.60 to $1.85 against open interest of 826 contracts, wagering on a pop when the numbers come out.

(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 The NASDAQ OMX Group, Inc.

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


This article appears in: Investing , Options

Referenced Stocks: SBAC

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