Tellabs has been dropping for almost a year, but it's been
surprisingly stable amid the recent selloff in the broader market.
optionMONSTER's tracking systems detected the sale of more than
28,000 June 5 puts for $0.30 and $0.35. Volume was 10 times
existing open interest in the strike.
The transaction represents a giant bet that the maker of
telecommunications gear will hold its ground. If the trader is
right, he or she will get to keep the credit earned. If they're
wrong, they're on the hook to buy more than 2.8 million shares.
TLAB fell 0.78 percent to $5.06 yesterday. It has lost more than 40
percent of its value in the last 10 months, gapping lower amid weak
forecasts in October and January.
The shares have now returned to about the same level where they
traded in July 2009, immediately before S&P 500 staged a big
rally. Some chart watchers may expect support to form at that
Value investors could also think TLAB is now attractive because its
enterprise value is less than three times EBITDA--far less than
related companies such as Cisco Systems or Juniper Networks.
TLAB climbed immediately after the puts were sold. That probably
resulted from purchases by the market marker who had bought the
puts and thus needed to hedge an implicitly short position in the
name. (See our Education section)
Overall option volume was 40 times greater than average in the
stock during yesterday's session.
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