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Charter bull sees rally by summer

Chris McKhann (chris.mckhann@optionmonster.com)

A three-way combination trade is looking for a rally in Charter Communications.

optionMONSTER systems show that a trader bought 2,000 June 135 calls for the ask price of $3.40 and sold 4,000 June 145 calls for $1.15 to complete a ratio spread yesterday. He or she also sold 2,000 June 110 puts for $1.50 to further offset the cost of the long calls . The volume at all three strikes was multiples of the previous open interest, therefore representing new positioning.

The trader ends up taking in a credit of $0.40, which will be kept as profit if CHTR is between $110 and $135 by expiration in mid-June. The maximum gain would come with the stock right at $145. Above that price the trader would effectively be short shares, and below $110 he or she would have to buy them because of the short puts . (See our Education section)

CHTR ended yesterday's session up 0.38 percent at $126.47 after trading lower in the morning. The cable operator was down near support at $120 at the end of February and up at resistance at $140 two weeks before that.
Total option volume in the name was just above the 10,000 mark, more than 14 times its daily average of just 707 contracts in the last month.

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