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Bulls discover nTelos, bet on rally

Mike Yamamoto (mike.yamamoto@optionmonster.com)

nTelos rarely sees unusual option activity, but the bulls were charging into the regional wireless carrier last week.

More than 6,500 June 15 calls were purchased for $0.30 to $0.75 on Friday, including one print of 5,000 that went for the ask price of $0.40, according to optionMONSTER's Heat Seeker tracking system. Open interest in the strike was just 660 contracts before the trades appeared, clearly showing that this is fresh buying.

These long calls lock in the price where the stock can be bought in the next six weeks no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $15 through mid-June. (See our Education section)

NTLS jumped 9.01 percent on Friday to close at $13.92, just below its 50-day moving average. The stock fell sharply from the $21 level in January and continued to decline until finding support around $12.50 in mid-March.

The Virginia-based communication company appeared to be breaking out of its recent range this month but again pulled back on Wednesday after missing earnings and revenue estimates. Management did reaffirm full-year guidance at that time, but short interest in the name has grown to an estimated 30 percent of the float.

Total option volume nTelos reached 7,837 on Friday, dwarfing its daily average of just 382 for the last month. Only 457 of those contracts were puts, a reflection of the session's bullish sentiment.

(A version of this post appeared on InsideOptions Pro on Friday.)

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