Time Warner, Inc. (TWX)
A massive transaction combining Time Warner stock and options suggests one strategist expects bullish movement in shares of the media and entertainment company ahead of February expiration.
- The combo-player initiated a delta neutral trade, selling 1,400,000 shares of the underlying at $33.00 each
- And buying 40,000 calls at the February $34 strike for a premium of $0.56 apiece, on a
This is another one of those stock and option combinations in which the investor wants to have his cake and eat it too. The short stock leg of the trade works in the event Time Warner loses value, but should the shares jump, the value of the calls is intended to swell and outpace losses on the now losing stock price.
As the share price increases the delta on the calls moves higher meaning that the value of the calls appreciate at a faster rate leaving the investor better placed as a bull. In other words, gains from the rising value of the call options, given share price appreciation, will eclipse losses that accumulate from the short stance in TWX shares.