Cablevision Systems is consolidating after a rally this month, and one bull is looking for more upside into the summer.
optionMONSTER's Heat Seeker tracking system detected the purchase of about 29,000 June 38 calls for $2.05 and the sale of an equal number of June 42 calls at an average premium of $0.35, resulting in a net cost of about $1.70. Volume was above open interest in both strikes.
This bullish call spread is designed to leverage a rally in the stock price. It will earn a profit of about 135 percent if CVC closes at or above $42 on expiration--just 14 percent above its current price. (See our Education section)
The cable-television stock is down 2.02 percent to $36.86 in afternoon trading but still up 19 percent in the last three months. Its last earnings report on Feb. 16 missed estimates after it lost subscribers, causing the shares to drop briefly before snapping back.
The buying support appears to be consistent with bullishness in the broader media sector of late as investors anticipate that a stronger economy will drive advertising revenue. (See our recent coverage of Time Warner for more on the trend.)
CVC is trading near long-term resistance around $38 that dates back to 2007. If it breaks that level, some chart watchers may expect a big rally. Today's call spread may also be looking for such a move.
The trade pushed overall option volume in the name to more than 250 times greater than average, with calls outnumbering puts by more than 1,000 to 1.
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