Alcatel Lucent has fallen to its lows of the year, but traders are looking for a bounce.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 September 3.50 calls for $0.14 and the sale of an equal number of September 3 puts for $0.06. That translates into a debit of $0.08.
Owning calls locks in the price where investors can get long the telecom supplier, while selling puts forces them to buy shares if they fall. Combining the two strategies is highly bullish, with the potential to generate significant leverage in either direction. For example, a 21 percent gain in the stock will yield profit of more than 500 percent. (See our Education section other more on how to maximize price swings with options.)
ALU rose 2.17 percent to $3.30 yesterday, one session after skidding to its lowest level since late October. The stock has struggled on the heels of reporting a quarterly loss on July 31.
Overall option volume was 3 times greater than average on Wednesday, according to Heat Seeker, with that bullish combination accounting for almost all the total.
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