Leap trade positions for rebound soon
David Russell | email@example.com
Our Heat Seeker monitoring system detected the purchase of 1,000 August 6 calls for $0.55. An equal number of August 6 puts traded at the same time for $0.64, and appear to be sold.
The net result is that the investor collected a credit of $0.09 and stands to earn infinite profits if the prepaid-wireless stock pushes higher over the next three weeks. He or she also faces losses to the downside. Because its risk profile is almost identical with buying stock, the strategy is known as a "synthetic" trade.
LEAP rose 7 percent to $6.04 in afternoon trading, but is still down more than 50 percent in the last 12 months. It's been falling amid weak financial results, but has been climbing in the last two sessions following strong reports from rivals MetroPCS Communications and Sprint Nextel.
LEAP will follow with its own set of numbers on Aug. 6 after the bell. There was also heavy trading in the October 7 calls for $0.59 and $0.60.
Today's activity pushed total option volume in the company to 10 times greater than average.