Bull call spread trades on Verizon

April 20, 2015 11:00 AM

Verizon options are among the most active by volume on Monday morning after a massive bullish spread was initiated in the January 2016 expiry calls. Shares in Verizon are up roughly 0.50% on the day at $49.13 as of 11:00 am ET.

More than of 221,000 option contracts have changed hands on Verizon today, or roughly 3.5-times the average daily volume for the stock of 62,000 contracts. The bulk of the overall volume is part of a call spread that looks for shares in Verizon to rally more than 20% during the next nine months. One options market participant appears to have purchased 100,000 of the Jan’16 55.0 strike calls at a premium of $0.46 each and sold the same number of calls at the Jan’16 60.0 strike at a premium of $0.11 apiece.

Net premium paid of $0.35 per contract implies an effective breakeven share price of $55.35, or an approximate 13.0% rise in the price of the underlying from the current level. The trade makes maximum potential profits of $4.65 per contract, or a total of $46.5 million, in the event that VZ shares jump 22% to top $60.00 at expiration next year. Shares in Verizon last traded above $60.00 back in January of 1999.

Chart shows 16-year chart of Verizon

About the Author

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.