Range-bound play in T-Mobile

optionMONSTER

A large trader apparently expects T-Mobile to stay range-bound in coming weeks.

optionMONSTER systems detected the sale of 5,000 TMUS July 35 calls for the bid price of $1.30 on a wide bid/ask spread today. This is clearly a new position, as previous open interest in the strike was 1,247 contracts.

Just after that trade, the largest block of TMUS stock changed hands as 300,000 shares were purchased for $33.90. That would offset the delta of the calls, making this a directionally neutral play that is short volatility.

The trader is betting that shares will remain in a range and/or that their volatility will be less than that implied by the options. The implied volatility of the calls is 35 percent, while the 20-day historical volatility of the stock is 19 percent. (See our Education section)

TMUS is down 1.25 percent to $33.47 this morning. The wireless carrier gapped up from near $29 to above support at $31 on earnings results at the start of May, and the stock posted a closing high of $34.86 two weeks ago.

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