Markets

Long-term bullish play on RadioShack

One investor apparently believes that RadioShack will have a better 2012 than 2011.

optionMONSTER's Heat Seeker tracking program detected the purchase of 4,500 January 2013 12.50 calls for $0.86 and the sale of 4,000 January 2013 7.50 puts for $0.97. Volume was more than 6 times open interest in both strikes.

The trade resulted in a credit of about $1,000 and will profit from a rally in the share price. It also stands to lose money to the downside, making it similar to owning stock. The main difference is that it will expire worthless if RSH stays between $7.50 and $12.50 over the next 13 months.

The electronics retailer has lost almost half its value this year and has returned to levels last seen in April 2009. It rose 2.62 percent to $9.81 on Friday.

One interesting aspect to the option strategy is that implied volatility was 52 percent in the puts versus 46 percent in the calls. That reduced the cost of the trade and let the investor use the market's perception that RSH is heading lower to finance the bet.

Overall option volume in RSH was 6 times greater than average in the session.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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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.

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