Sprint Options (S): Unusual Trading Activity
Options in money-losing Sprint Nextel (S) experienced quite a bit of unusual volume during Monday’s trading session.
Although the near term call and put volume was relatively calm, the August options were eye-popping.
More specifically, the August 2 1/2 put options. There were a few option traders who came in and sold a total of 11,000 of these puts. This was more than 10 times the normal volume on this strike.
The puts were sold for an average price of $0.30.
With Sprint now trading at $2.73, these guys think Sprint will still be trading over $2.50 per share come August expiration. If that does indeed happen, the investors in these puts will keep the entire premium… meaning they’ll make 12% in just months.
So obviously these guys are bullish on Sprint right now… and I couldn’t agree more.
As you know, Sprint offers a range of wireless and wire line communication products and services to individual consumers.
Since Sprint is one of the smaller wireless providers, it’s been beaten down over the last few years.
This has been mainly due to the rise in bigger mobile providers like Verizon (VZ) and T-Mobile.
What’s worse is that yesterday Sprint suffered another sharp blow after Bernstein analysts cut the stock to underperform, saying the “risk is rising” for a bankruptcy.
This on top of the fact Sprint has had negative cash flow since 2005.
However, I disagree with the bankruptcy claim…
I believe these analysts are overlooking a few key elements.
For instance, the addition of the iPhone to their network will certainly accelerate subscriber growth.
What’s more, Sprint saw 3.4% higher revenues in 2011. And with the additional Apple services, their revenue is expected to continue its rise. Overall, Sprint is expected to show 6.1% growth in 2012.
In my opinion, this isn’t the making of a company headed for bankruptcy.
So I like the idea of selling puts in here… it makes a lot of sense.
For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research. It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio. Click here to subscribe for free.
Category: Unusual Options Trading Activity
