Sprint Nextel Drawing Bearish Investors

By David Russell

Sprint Nextel (S) rallied 20% Monday, but one big investor expects the telecom stock to make new lows by mid-January.

optionMONSTER's tracking systems detected the purchase of 30,428 January 3 puts for $0.26 and the sale of an equal number of January 4 calls for $0.16. Volume exceeded open interest in both strikes.

Sprint Nextel fell 5.54% to close at $3.24. The stock spent the entire month of October making a smooth trend lower and has erased half its gains since bottoming a year ago. On Oct. 29, the company reported a wider loss and weaker-than-expected revenue amid big customer defections.

Tuesday's so-called risk-reversal trade is designed to maximize the gains on S moving lower. It will double the investor's money for every $0.10 that S falls below $2.90, and lose money if the stock rallies over $4.

The trade pushed overall options volume in S to nearly five times greater than average.

(Chart courtesy of tradeMONSTER)

Comments

[Nextel Acce...:]

ok, so what is the basis of this expectation?

Nov 11 04:59 PM

[Geddy:]

Let's see...couldn't be because they haven't been customer add positive in over 2yrs, outsourced their entire Network team to a vendor, have horrible customer service, and are getting ready to lay off another couple thousand employees could it?


On Nov 11 04:59 PM Nextel Accessories wrote:

> ok, so what is the basis of this expectation?

Nov 12 05:14 PM