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

Upcoming Webinar:

How to Defend Your Portfolio and Profit in a Market Selloff

http://bit.ly/1OSMWU6

Jon Najarian and Sandy Chaikin of Chaikin Analytics demonstrate how to play defense when the market is selling off. And, how to turn misery into money, whether investing in stocks or trading options.

Education & Strategy

The sweet spot

When using the Stock Replacement Strategy, we must remember that in reality, we are doing a STOCK trade. We are just using options. We are replacing the stock position with an option position (long calls).

View more education articles »