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Trader sees cap on News Corp. upside

Posted
12/5/2012 3:45:00 AM
By: optionMONSTER
Referenced Stocks:NWSA

One investor is ringing the register in News Corp. with the media stock back at a long-term high.

optionMONSTER's Depth Charge monitoring program yesterday detected the purchase of 5,952 April 20 puts for $0.30 and the sale of an equal number of April 24 calls for $1.60. Volume was more than 25 times open interest at both strikes.

He or she probably owns shares and has agreed to sell them for $24 if they're above that level on expiration. Including the $1.30 credit earned, the exit price would be $25.30--roughly the same area where shares peaked in April 2007.

NWSA slipped 0.1 percent to $24.50 yesterday. The stock is up 37 percent so far this year amid strong earnings as investors flock to the media space. Traders have also targeted the name after management said it would split its publishing and entertainment businesses into two new companies.

Yesterday's option trade gives the investor the right to sell shares for $20 if they go below that level, or $21.30 including the credit received on Tuesday. If the stock closes between $20 and $24 on expiration, both the calls and puts will expire worthless in this strategy, known as a collar . (See our Education section)

The trade pushed overall option volume to almost triple the daily average in the session, according to the Depth Charge.