Markets

Premiums seen rising for NII Holdings

One investor sees volatility in the future for NII Holdings.

optionMONSTER's monitoring programs detected the purchase of about 8,000 June 27 calls, most of which priced for $0.75, against no previous open interest. While such activity would normally be bullish, a large stock sale followed it by a few minutes, which suggests that a more complicated trade had taken place.

It appears to be a so-called delta-neutral strategy, when calls are bought and stock is sold. That eliminates the directional bias of the position and leaves the investor exposed to nothing but option prices.

This also seems to be the case because the options are far out of the money and expire long into the future, which makes them more sensitive to changes in implied volatility rather than to movement in the underlying share price. (See our Education section)

Implied volatility in the company, which provides wireless service across Latin America, has been climbing since August and now stands at about 54 percent. NIHD fell 0.56 percent to $19.59 yesterday and is trading at its lowest levels since July 2009 amid a wave of bearishness toward emerging markets.

Yesterday's trade pushed total option volume in the stock to 9 times greater than average.

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

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


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

Other Topics

Options

Latest Markets Videos