Sprint Corporation (S) Trader Eyes Long-Term Uptrend

Sprint Corp (S) is sitting atop its 80-day trendline for the first time in months

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Published on Feb 6, 2015 at 9:35 AM
Updated on Apr 20, 2015 at 5:09 PM

Sprint Corp (NYSE:S) soared yesterday on better-than-expected fiscal third-quarter sales, tacking on 5.2% to close at $4.82. Meanwhile, one call buyer placed a massive bet on additional upside through June options expiration.

Diving into the data, Trade-Alert indicates one trader bought to open a total of 10,000 June 6 calls. Based on the premium of $0.23 per contract, the transaction cost roughly $230,000 -- number of contracts * premium paid * 100 shares per contract -- which represents the buyer's maximum potential risk, should the option settle out of the money at expiration. By contrast, the trader stands to profit if the underlying rallies north of the at-expiration breakeven mark of $6.23 (strike plus premium paid) -- territory not charted since early November.

Taking a step back, calls have been the options of choice among S speculators in recent months. The stock's 50-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) checks in at 4.05 -- higher than roughly four-fifths of all readings taken in the last year.

This is somewhat surprising, given Sprint Corp's (NYSE:S) lackluster technical track record. On a year-over-year basis, the shares have retreated nearly 39%. However, yesterday's pop had S closing atop its 80-day moving average for the first time since last June, which could translate into support. In fact, the shares are up 0.8% out of the gate, after news that S will set up camp in a number of RadioShack stores -- following the company's Chapter 11 bankruptcy filing -- was met with a price-target hike to $5 from $4 at Barclays, and an upgrade to "hold" at Evercore ISI. Cowen and Company, however, cut its price target by $1 to $4, and lowered its outlook to "market perform" from "outperform."

Daily Chart of S since June 2014 with 80-Day Moving Average


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