U.S. Markets open in 6 hrs 20 mins

What's behind big trades in CenturyLink

Chris McKhann (chris.mckhann@optionmonster.com)

Shares of communications company CenturyLink have fallen to 10-month lows while action in the October options heats up.

CTL is down 0.76 percent to $39.01 as the broader market rallies, its lowest level since last September. Shares are 17 percent off of the December highs and have been trending lower since.

CenturyLink's option volume of 15,000 contracts is 7 times the daily average. The action in October makes up the most of this, as 6,500 each of the October 35 puts and 39 calls trade at more than the previous open interest at those strikes. The puts were bought for $0.65, while the calls were sold for $1.20.

This could be an outright bearish bet or a collar on long shares. The collar trade is protective in nature, using the income from the sold calls to buy protective puts. It is a very popular institutional trade, though it is theoretically the same as a bullish vertical spread . (See our Education section)