MetroPCS faces three-way put spread
Chris McKhann | firstname.lastname@example.org
optionMONSTER systems show that 15,000 PCS options have traded, compared to a daily average of 3,500 in the last month. Virtually all of that action was in a three-way put spread.
A trader sold 5,000 January 11 puts for the bid price of $1.50 against open interest of more than 47,000 contracts. Second later he or she bought 5,000 May 10 puts for $1.17 and then sold 5,000 May 8 puts for the bid price of $0.22. The volume at these two strikes was under 700, so that is a new vertical spread.
The trader is closing the in-the-money January puts and rolling the position to the lower strikes in the May spread. He or she takes a profit on the roll, and the $0.95 spent on the $2 spread in May was $0.44 in the money itself. (See our Education section)
PCS is up 2 percent to $9.53. Yesterday's close of $9.33 was its lowest since mid-August. Shares of the wireless carrier traded above $14 briefly at the start of October but have been sliding since.