Credit: Shutterstock photo(The following is an example of notable trading cited on optionMONSTER's InsideOptions Pro service yesterday.)
The bulls are targeting Level 3 Communications.
optionMONSTER's Heat Seeker market scanner shows that 5,035 January 55 calls were purchased for $1.15 and 5,035 January 60 calls were sold for $0.10 yesterday. This is new positioning, as volume was far above open interest in both strikes.
The resulting vertical spread cost a net $1.05 and is looking for a rally above $55 by mid-January, with a maximum potential profit of 376 percent. The sale of the higher-strike contracts reduces the cost of the long calls but limits potential gains, as the trader will be obligated to sell shares if they rise above $60. (See our Coaching section)
LVLT fell 0.28 percent to $52.64 yesterday but is up 16 percent in the last three months. The network-technology company gapped higher on a strong earnings report in late October, and now the bulls are looking for it to break free of its 200-day moving average.
The next set of quarterly numbers is estimated to come out on Feb. 3.
Overall option volume in the name was 25 times greater than average, according to the Heat Seeker. Total calls outnumbered puts by a bullish 58-to-1 ratio.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
