Traders position for Adtran rebound
David Russell | [email protected]
optionMONSTER's tracking programs detected unusual volume in the name on Friday, with more than 3,100 contracts changing hands. That's almost 12 times the normal daily turnover.
The activity began shortly after the open in the December 19 puts, with an even 1,500 contracts sold for $0.65 to $0.80. The investor is now obligated to buy ADTN shares for $19 if they close below that level on expiration two weeks from now. If they go above it, he or she will keep the credit and the puts will be rendered worthless.
ADTN fell 0.96 percent to $18.60, and has lost more than 40 percent of its value in the last year. The communication-service provider's current level offered support in 2005 and early 2008, which could be leading some traders think that the shares are due for a bounce.
It's interesting that Friday's traders sold in-the-money puts because the position will behave similarly to owning stock. The short puts will profit from the shares rising, with their maximum profit at or above $19. (See our Education section)
The second flurry of activity in ADTN was more decidedly bullish. About 90 minutes before the close, some 1,400 May 20 calls were purchased for $1.45. Those contracts fix the price where the stock can be bought, and offer significant leverage if the shares rally into the spring. But if it doesn't move, the long calls will become worthless.