Sprint (S) shares are up over 1.5 percent in pre-market trading Tuesday. The stock has traded in a 52-week range of $5.61 – $7.26, and shares are off about 4 percent on the year. The stock is also off nearly 17 percent from its high close of $7.25.
Sprint has recently come under fire by rival networks, who have said the network will soon lack the capacity to continue to support the unlimited data it offers Smartphone customers.
Speaking at the Goldman Sachs investor conference, CFO Joe Euteneuer reaffirmed the company’s commitment to unlimited data, as well as its year end goal of having 200 million customers using it’s LTE (4G) services. Last month, announced an expanded retailed presence in the form of a partnership with Costco (COST), which will allow it to sell its products in over 100 of the discount retailer’s stores.
On Monday, we saw an institution sell 14,000 S Nov 6 Puts for $0.23 (3.5 times usual volume). The entity behind this trade is making a big bet the stock will be above 6 dollars per share when Nov options expire on the third Friday of next month. As I’m generally bullish for Q4, I want to play the same level as the put seller, but by purchasing outright calls. The Nov 6 Straddle is implying around a $0.60 move, so at about $0.30 I like the price of the S Nov 6 Calls.
THE TRADE
Buying S Nov 6 Calls for around $0.30
Risk: $0.30
Reward: Theoretically unlimited
Break-even: $6.30
THE GREEKS
Delta: Long
Gamma: Long
Theta: Short
Vega: Long
