One investor apparently thinks that News Corp. may grind slowly higher into the summer and wants to profit from the move.
optionMONSTER's Heat Seeker monitoring system detected the purchase of 6,250 July 28 calls for $1.40. Some 12,500 July 30 calls were sold at the same time for $0.55. Volume was more than 12 times open interest at both strikes.
This vertical spread cost $0.30 and will earn a maximum profit of 567 percent if the media stock closes at $30 on expiration. Gains will erode above that level and turn to losses over $32.
The unusual performance profile results from the fact the investor sold more calls than they bought. This increases leverage to a small move by lowering the cost basis but creates risk if it moves too far in the intended direction. The strategy is also known as a ratio spread because twice as many contracts were sold as the number purchased.
NWSA is up 0.16 percent to $27.45 in morning trading and is up 44 percent in the last year. It peaked at $29.41 in early 2000, and today's call spread is apparently looking for a return near that level, followed by a pause. (See our Education section for more on how options can be used to time the market.)
Almost 19,000 contracts have traded so far in the session, which is triple the average amount. Calls outnumber puts by more than 1,000 to 1.
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