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Call spread follows rebound in Level 3

Chris McKhann (chris.mckhann@optionmonster.com)

An odd call spread is targeting Level 3 Communications as its shares spike higher.

optionMONSTER systems show that a trader bought 3,000 January 22 calls for $1.45 and seconds later sold 4,600 March 24 calls for $1.50. The volume at each strike was above open interest in the strike at the beginning of the day, so this is fresh activity.

This diagonal call spread is designed to profit from further upside, but not too quickly and not beyond the $24 level. The trade can profit with shares anywhere below that price, but those gains would be limited. (See our Education section)

LVLT is up 7.19 percent to $23.27 in early afternoon trading. The broadband-data company was down at support around $18 at the end of November, but today's gains have brought the stock back to where it was in mid-October.

More than 15,800 LVLT options have traded already today, compared with a full-session average of about 500 in the last month.

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