CMCSK – Comcast Corp. – The use of a short strangle on the provider of video, high-speed Internet and phone and cable services suggests one strategist expects the price of the underlying stock to remain range-bound through August expiration. Comcast’s shares inched 0.75% higher during the first half of the session to arrive at $17.70 just before 11:35 am ET. One options trader appears to have sold 4,000 calls at the August $18 strike for a premium of $0.15 each in combination with the sale of 4,000 puts at the lower August $17 strike also for premium of $0.15 apiece. Gross premium pocketed by the strangle-seller amounts to $0.30 per contract. The investor keeps the full premium received on the sale as long as Comcast’s shares trade within the range of the strike prices described through expiration day. The trader is exposed to potentially devastating losses should shares fail to settle within the specified range. Losses start to accumulate if the price of the underlying stock rallies above the upper breakeven price of $18.30, or if shares slip beneath the lower breakeven point at $16.70, ahead of expiration.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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