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Vodafone Group Plc (ADR) (NASDAQ:VOD) has been on a tear since Aug. 29, when the company acknowledged it was in discussions with Verizon Communications Inc. (NYSE:VZ) to sell its 45% stake in Verizon Wireless. Days later, of course, the deal came to pass. In options land, Vodafone is experiencing an influx of put traders; more than three times the typical put volume has crossed the tape, in fact. Far and away the most active option is the January 2014 30-strike put, where over 10,000 contracts have been swapped -- all at the ask price, conveying they were bought. Implied volatility is fractionally higher, too, pointing to the creation of new long positions. Commentary from Trade-Alert likewise hints at buy-to-open action.
Looking more closely at what's happened at the strike, we note a block trade of 9,836 contracts, which occurred just before 11 a.m. EDT. The speculator purchased the out-of-the-money puts at a premium of $0.65. Therefore, in order to start profiting, he needs the shares to pull back past $29.35 (the strike price less the premium paid) by January options expiration. If VOD doesn't breach the strike, the most the trader risks losing is the initial cash outlay.
There is, however, another possible explanation for the put buying. Given Vodafone Group Plc's (ADR) (NASDAQ:VOD) rapid advance over the past 10 sessions, today's big trader may actually have picked up the out-of-the-money puts as a hedge for his long stock position.
Today, VOD is flat at $33.18, on the news that its U.K. CEO Guy Laurence has been appointed Rogers Communications Inc.'s (USA) (NYSE:RCI) new chief executive, effective Dec. 2.
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