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Bulls think Lions Gate will bounce

By: optionMONSTER
Posted: 3/31/2014 3:25:00 AM
Referenced Stocks: LGF

Lions Gate Entertainment has fallen hard, but the bulls are looking for a bounce.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 13,300 April 26 calls for $0.80 and the sale of an equal number of April 31 calls for $0.10. Volume was more than twice open interest at both strikes, indicating that new positions were initiated.

Known as a bullish call spread , the trade cost $0.70 and will inflate to $5 if shares close at $31 or higher on expiration. That would be a profit of more than 700 percent from the entertainment stock moving less than 25 percent. (See our Education section for more on the leveraging power of options.)

LGF fell 3.23 percent to $25.20 on Friday and has lost more than 18 percent of its value in the last month. It's been falling along with other media companies money shifts from consumer discretionary stocks into emerging markets and energy.

The benefit of using the spread is that the trader risks only a small amount of capital. He or she may have been one of the many investors who're unloading media names but wants to keep some exposure in case LGF rebounds.

Total option volume was 6 times greater than average in the session, according to the Heat Seeker, with calls outnumbering puts by a similar proportion.

LGF also saw a bullish transaction earlier in the month , with investors more than doubling their money in less than a week.