OptionsHouse

Options Trading News

October 4, 2012  Thu 4:14 AM CT

S: SEE CHART GET CHAIN FIND STRATEGIES
The bulls cannot hang up the phone on Sprint Nextel.

Last week the wireless carrier's shares pulled back after doubling since the spring. Option buyers jumped into the name early yesterday, snapping up more than 2,800 Weekly 5 calls expiring at the end of this week, according to optionMONSTER's Heat Seeker tracking system.

Calls lock in the price investors must pay to own a stock and can generate some nice leverage in the event of a rally, but they will end up worthless if the shares don't move. Yesterday they worked for the bulls.

The initial trades priced for $0.06 when S was down 1 percent at $4.84. The shares then started to climb and ended the session at $5.20, a gain of 6.12 percent. But that profit was nothing compared with gains in the calls, which more than quadrupled in value to $0.28 by the end of the session. (See our Education section)

Volume in the calls kept growing to 12,543 contracts. Overall option volume in the company was triple normal amounts, with total calls in all strikes outnumbering puts by a bullish 2-to-1 ratio.

(A version of this post appeared on InsideOptions Pro yesterday.)
Share this article with your friends


OptionsHouse

Premium Services

Archived Webinar

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »