Calls run higher on reported Charter bids

Chtr89

Charter Communications rallied again today on buyout speculation, continuing to hand exponential gains to bullish option traders.

On June 29, Investitute’s systems identified the purchase of 3,000 August $350 calls for $10.20 to $10.80 with shares at $338.21. Open interest in the strike was a mere 23 contracts before the trades appeared, showing that they were new positions.

Those calls were listed for $51 today, representing an average profit of more than 385 percent. The stock rose 18.5 percent in the same time frame, underscoring the kind of leverage that can be obtained with options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

CHTR rose 2.86 percent to $400.90 today. The cable operator jumped to an all-time high of $408.83 earlier in the session after news reports that Dutch telecom Altice was in early negotiations to acquire the Connecticut-based company. This follows speculation last month that Japan’s Softbank could be a potential suitor for Charter.

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Mike Yamamoto

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