Cablevision Systems is attracting bullish option activity amid takeover speculation in its industry.
A trader bought 2,000 January 17 calls for $0.67 and, at the same second, sold 2,000 January 14 puts for $0.27 on Wednesday, according to optionMONSTER's Heat Seeker tracking system. Volume was above the previous open interest in the latter strike, indicating that this is a new combination spread.
The trade is highly bullish, as a rally would increase the value of the long calls as premiums dwindle for the puts that were sold short . But the opposite would occur if the stock falls.
The net cost of the spread is $0.40, which is the position's maximum loss if CVC remains below $17 through mid-January. If the stock falls below $14, however, the trader will be on the hook to buy shares at that level. (See our Education section)
The trader is counting on CVC staying above that $14 level apparently because it has held as support for more than a year. The New York-based company gapped up from below $15 last Friday as rumors circulated about possible mergers among several cable operators, and the stock gained another 5.08 percent on Wednesday to close at $16.56.
Total option volume in Cablevision topped 26,100 contracts on Wednesday, quadruple its daily average for the last month.
More From optionMONSTER
- Bull keeps the faith in J.C. Penney
- How volatility trader is playing 3M
- Bulls stay in Yahoo at new highs
- Stocks & Offerings