Call Options Or Put Options On Sprint (S)?

| August 6, 2014 | 0 Comments

Sprint optionsWireless carrier Sprint (S) is making headlines this week. The company just ended its merger plans with rival T-Mobile (TMUS).

S shares are currently trading at $5.96, down 18% on the day. The stock is trading 48% below the 52-week high of $11.47 and is just 1% above the 52-week low of $5.92.

Is this an opportunity to buy call options on S with merger concerns now out of the way? Or should you buy put options on S because the company will find it hard to compete without TMUS?

The bulls make a convincing argument…

Most of the commentary on the termination of the proposed Sprint/T-Mobile merger has been negative. Investors seem to be jumping ship in droves. But why?

After all, there was going to be a ton of costly red tape to deal with… which is why Sprint pulled the plug to begin with. And, the last time Sprint merged (with Nextel), it was a disaster.

More importantly, not relying on TMUS to grow business gives S a chance to make key internal improvements. Under the direction of a new CEO, Sprint now has the opportunity to focus on new business, new marketing, and new strategies.

But the bears have a compelling case as well…

There’s a reason S shares are down almost 20% today. The merger with T-Mobile was perhaps the only way the company could compete with Verizon (VZ) and AT&T (T).

TMUS would have given the company access to a larger customer base, more competitive prices, and faster broadband. Now S will have to tackle all those issues on its own.

Sprint is the only major wireless brand to lose subscribers last quarter. And, the company will have to turn things around quickly in order to stop the bleeding.

So is it time to be bullish on S due to a fresh start, or should you take a bearish position because the company lost a huge chance to be competitive?

If you think the bulls are right, take a look at buying the S September 20th 6 calls for around $0.40.

If you think the bears are right, take a look at buying the S September 20th 6 puts for around $0.55.

Yours in Profit,

Gordon Lewis

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.