business newsComcast Corporation Sees a Spike in Longer-Term Trading
By
Schaeffer's Investment Research
Mar 05, 2013 3:07 pm
One strategist employed a short strangle on CMCSA.
PRINT
-
Stay Connected
-
-
-
-
Comcast Corporation (NASDAQ:CMCSA) saw some options activity on both sides of the trading fence on Monday, with roughly 14,000 calls and 15,000 puts crossing the tape -- about double the equity's average single-session volume. A large portion of this volume was concentrated on the January 2014 series of options, with one strategist betting on minimal long-term movement for CMCSA.
Specifically, matching blocks of 8,255 contracts were simultaneously sold at the January 2014 50-strike call and the January 2014 35-strike put -- the former for $0.36 each, and the latter for $1.69 apiece. This resulted in a net credit of $2.05 per pair of contracts. Because open interest surged at both strikes overnight, it's likely that one trader constructed a short strangle on CMCSA.
Essentially, the trader is betting on the stock to close at or between the strike prices at expiration -- rendering both options worthless, and allowing him to pocket the net credit received, which represents the maximum profit on the play. There are two breakeven rails in this strategy: $32.95, or the put strike minus the net credit; and $52.05, or the call strike plus the net credit. However, should the shares rise north of the $52.05 mark, the trader's losses could be theoretically unlimited. (Losses if the stock is trading south of $32.95 at expiration are unlimited down to $0.)
From a broader perspective, CMCSA calls have been preferred over puts in recent months. In fact, the equity's 50-day call/put volume ratio checks in at 2.79, indicating calls bought to open have nearly tripled puts during the past 10 weeks. This ratio is just 5 percentage points shy of annual high, meaning speculators have rarely picked up bullish bets over bearish at a faster clip during the last 12 months.
The broadcasting giant has put in a decent performance on the charts lately, having gained more than 9% year-to-date, and roughly 40% on a year-over-year basis. What's more, CMCSA tagged a record high of $42 on Feb. 13 after the company revealed it will acquire the remainder of NBCUniversal from General Electric Company (NYSE:GE).
This article by Terri Stridsberg was originally published on Schaeffer's Investment Research.
Below, find some more great content from Schaeffer's Investment Research:
Daily Game Plan – Dow to New All-Time Highs
Trading 101: Dow Theory
Did Dilbert Just Confirm The Bull Market Has Legs?
Twitter: @schaeffers
Specifically, matching blocks of 8,255 contracts were simultaneously sold at the January 2014 50-strike call and the January 2014 35-strike put -- the former for $0.36 each, and the latter for $1.69 apiece. This resulted in a net credit of $2.05 per pair of contracts. Because open interest surged at both strikes overnight, it's likely that one trader constructed a short strangle on CMCSA.
Essentially, the trader is betting on the stock to close at or between the strike prices at expiration -- rendering both options worthless, and allowing him to pocket the net credit received, which represents the maximum profit on the play. There are two breakeven rails in this strategy: $32.95, or the put strike minus the net credit; and $52.05, or the call strike plus the net credit. However, should the shares rise north of the $52.05 mark, the trader's losses could be theoretically unlimited. (Losses if the stock is trading south of $32.95 at expiration are unlimited down to $0.)
From a broader perspective, CMCSA calls have been preferred over puts in recent months. In fact, the equity's 50-day call/put volume ratio checks in at 2.79, indicating calls bought to open have nearly tripled puts during the past 10 weeks. This ratio is just 5 percentage points shy of annual high, meaning speculators have rarely picked up bullish bets over bearish at a faster clip during the last 12 months.
The broadcasting giant has put in a decent performance on the charts lately, having gained more than 9% year-to-date, and roughly 40% on a year-over-year basis. What's more, CMCSA tagged a record high of $42 on Feb. 13 after the company revealed it will acquire the remainder of NBCUniversal from General Electric Company (NYSE:GE).
This article by Terri Stridsberg was originally published on Schaeffer's Investment Research.
Below, find some more great content from Schaeffer's Investment Research:
Daily Game Plan – Dow to New All-Time Highs
Trading 101: Dow Theory
Did Dilbert Just Confirm The Bull Market Has Legs?
Twitter: @schaeffers
No positions in stocks mentioned.
Daily Recap
Everything you need to know for the next trading day.
Trading Radar (weekly)
Your road map to all the events that will effect financial markets in the week ahead.
Name
Email
*
Phone
* required field
