Options Trading News

At least one trader is looking for a strong earnings report from Level 3 Communications today.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 1,000 May 24 calls for $1.05 and the sale of an equal number of May 26 calls for about $0.39. Volume was above open interest at both strikes.

The trade resulted in a cost of $0.66 and will earn a maximum profit of 203 percent if the stock closes at or above $26 on expiration. The strategy is known as a call spread because it leverages a move between two prices, in this case $24 and $26. (See our Education section)

LVLT rose 4.43 percent to $24.26 yesterday. It peaked at $27.99 in March before retreating down near $22 last week. The broadband-data company, which counts Netflix as a major customer, beat expectations and issued strong guidance the last time earnings came out on Feb. 8. Management cited increased demand for online video.

There was also bullish activity in the name earlier in the week when traders bought the May 23 calls for $1.10 and the May 25 calls for $0.55. Those contracts had appreciated to $1.95 and $0.90 by yesterday's close.

Overall option volume in LVLT was more than quadruple the daily average yesterday, with calls accounting for more than three-quarters of the activity.