How one bull is playing Liberty Global
David Russell | [email protected]
optionMONSTER's tracking programs detected the sale of 2,000 November 60 puts for $1.45 against open interest of 1,267 contracts. The trade accounted for almost all the option activity in the cable-television company, which generates more than 90 percent of its revenue in Europe.
The investor is now obligated to buy shares if they close below the strike price on expiration, but including the credit earned their entry price would be $58.55. Above $60, the contracts will expire worthless and they'll keep the $1.45 credit.
LBTYA rose 0.02 percent to $60.28 yesterday. The stock is up 47 percent so far this year and has appreciated more than 500 percent since the broader market bottomed out in March 2009.
Selling puts is a common strategy when traders like a stock but don't want to spend capital to get long. It allows them to set an entry price below current levels and get an opportunity to make some money even if the pullback doesn't occur. The main risk is that shares fall more than expected. (See our Education section)