Early this morning we saw a large block trade in LVLT. Paper sold 19,735 Sep 29 Puts to buy 19,735 Sep 24-29 Call Spreads for a total debit of $0.55. This was a huge position, nearly 70 times average daily option volume in this name. The stock was trading at $22.48 when this trade took place, and the stock has already seen a rally. This trade involves selling puts to fund the purchase of the call spreads. The short put component of this trade is extremely risky. With that in mind I want to look at a trade that gets me long the stock without a huge risk component.

Trade:

Buying the LVLT Sep 25-29-33 Call Fly for $0.50

Risk: $50 per 1 lot

Reward: $350 per 1 lot

Breakevens: $25.50 and $32.50

Paper bought 1,000 AFSI Sep 35 Calls for $1.75 (4.5 times usual volume) with stock at $33.12
Paper bought 2,000 GRPN May 10th 6 Calls for $0.28 (2.1 times usual volume) with stock at $5.65
Paper bought 712 MWV Jun 37.5 Calls for $0.30 (15 times usual volume) with stock at $34.40
Paper bought 13,000 ATVI Jun 16 Calls for $0.30 (6 times usual volume) with stock at $14.95
Paper bought 2,500 GTE Nov 7.5 Calls for $0.35 (9.8 times usual volume) with stock at $6.00

Paper bought 12,500 XLP Jun 38 Puts for $0.16 (2.1 times usual volume) with stock at $40.91
Paper bought 2,670 VMED May 50 Puts for $0.55 (20.2 times usual volume) with stock at $50.15
Paper bought 979 SKS May 12 Puts for $0.40 (4.8 times usual volume) with stock at $11.86
Paper bought 900 HRL Jun 40 Puts for $0.80 (3.3 times usual volume) with stock at $41.09

The stock has not traded above the Ichimoku Cloud since early February and has been in a strong downtrend since April of 2011.

Trade:
Buying the CLF Jun 19-17-15 Put Fly for $0.36
Risk: $36 per 1 lot
Reward: $164
Breakeven: $15.36 and $18.64

-James Ramelli, Trader at KeeneOnTheMarket.com.
James@keeneonthemarket.com