IB Options Brief: NII Holdings, Inc. (NIHD)
NIHD ñ NII Holdings, Inc.
The provider of wireless services in Latin America popped up on our scanners this morning after a large three-way spread was initiated in the September expiry options. Shares in NII Holdings, Inc. are trading lower this afternoon, down 0.90% at $11.05, reversing earlier gains. The stock has been crushed during the past year, down 75.0% from the July 7, 2011, 52-week high of $44.00, hovering around its lowest lows of the financial crisis. The three-legged options play on the stock today makes money if NIHD shares rally during the next few months.
It appears one strategist sold 6,000 puts at the Sept. $9.0 strike to offset the cost of purchasing a 6,000-lot Sept. $13/$15 call spread, done at a net premium of $0.09 per contract. The options player profits at expiration if shares in the wireless provider soar 18.5% to exceed the effective breakeven price of $13.09, and could walk away with maximum potential profits of $1.91 per contract given a more than 35.0% move higher in the share price over the stated time horizon.
On the flip side, the trader could lose the full premium paid to initiate the bullish position if shares in the name fail to top $13.00 at expiration. Further, the strategist could wind up having 600,000 shares of the underlying put to him at $9.00 each in the event NIHD shares extend losses and the puts land in-the-money at expiration. Shares in the name last traded above $15.00 in April. Second-quarter earnings from the wireless provider are expected out prior to the opening bell on July 26th.
Note: The material presented in this commentary is provided forinformational purposes only and is based upon information that isconsidered to be reliable. However, neither Interactive Brokers LLC norits affiliates warrant its completeness, accuracy or adequacy and itshould not be relied upon as such. Neither IB nor its affiliates areresponsible for any errors or omissions or for results obtained from theuse of this information. Past performance is not necessarily indicativeof future results.
This material is not intended as an offer or solicitation for thepurchase or sale of any security or other financial instrument.Securities or other financial instruments mentioned in this material arenot suitable for all investors. Any opinions expressed herein are givenin good faith, are subject to change without notice, and are onlycorrect as of the stated date of their issue. The information containedherein does not constitute advice on the tax consequences of making anyparticular investment decision. This material does not take into accountyour particular investment objectives, financial situations or needsand is not intended as a recommendation to you of any particularsecurities, financial instruments or strategies. Before investing, youshould consider whether it is suitable for your particular circumstancesand, as necessary, seek professional advice.
View Caitlin Duffy's post archive >