Trader looks for Level 3 to elevate
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring program detected the purchase of 20,000 September 24 calls for $1.45. Equal numbers of September 19s puts and September 29 calls were sold at the same time for $0.60 and $0.30 respectively. Volume was more than 100 times the previous open interest at all three strikes, indicating that new money was put to work.
Owning calls locks in the price where shares can be purchased in the broadband communications company, while selling puts obligates the trader to buy the stock if it tanks. Combining the two trades results in a position that will behave very similarly to owning the stock. (See our Education section)
It cost $0.55 to open and will earn a maximum profit of 809 percent on a move to $29 by late summer. The investor is also betting that the shares will remain above $19 during that time, something he or she might be willing to do because it formed an "inverse head-and-shoulders" pattern above that level in March and April.
LVLT rose 5.35 percent to $22.66 yesterday. The stock has been churning in a range for the last 18 months but has been making incrementally higher lows for more than a year, which is potentially bullish.
Total option volume was 98 times greater than average in the session, according to the Heat Seeker.