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October 7, 2011  Fri 1:20 PM CT

LVLT: SEE CHART GET CHAIN FIND STRATEGIES
Shares of Level 3 Communications have seen large price swings this week, but one trader is looking for it to calm down.

optionMONSTER's monitoring system detected the sale of 6,600 November 1.50 calls for $0.25 to $0.30 and an equal number of November 1.50 puts for $0.05 to $0.10. Volume was more than twice open interest in both strikes.

LVLT is up 2.8 percent to $1.66 in afternoon trading. The broadband communication company spiked as high as $2.40 on Wednesday, followed by another push to $1.85 yesterday. Both times the shares quickly met with selling and fell back toward their recent range.

All that movement has pushed up implied volatility to about 85 percent from about 75 percent, which has also boosted premiums. Traders often sell calls and puts when they think that options are pricing in too big a move.

Known as a short straddle, the position is an example of a market-neutral strategy that makes money from the passage of time rather than a direction move. (See our Education section)

Overall option in the name is 4 times greater than average so far today.
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The Movement of Delta

In our last column, we spoke about delta. You might remember that we discussed what delta was and what factors affected or changed delta. As you recall, we stated that three factors will have an effect on delta. They were movements of time, volatility, and underlying price. Today, we want to take a further look into the change of delta, this time focusing on change due to the movement in the underlying price. 

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