S – Sprint Nextel Corp. – A massive call spread involving 200,000 option contracts was transacted on wireless communications company, Sprint Nextel Corp., during afternoon trading today. Sprint’s shares increased as much as 3.83% during the session to touch an intraday high of $4.61. Looking at the mammoth trade purely from an options perspective, it appears to be a bull call spread, with 100,000 calls picked up at the January 2011 $5.0 strike at a premium of $0.38 each, and 100,000 calls sold at the higher January 2011 $6.0 strike for premium of $0.12 apiece. But, it looks as though the spread was tied to the sale of 2.3 million shares of the underlying stock at a price of $4.5565 each. The number of sold shares matches up with the delta of approximately 0.23 on the spread, which suggests the transaction is a delta neutral hedge. Net premium paid to put on the call spread amounts to $0.26 per contract. Roughly 212,000 contracts changed hands on Sprint Nextel Corp. thus far in the trading session, which represents approximately 42.8% of total existing open interest on the stock of 494,824 contracts.
Affiliation: Interactive Brokers
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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