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Someone made a quick buck trading cable mergers

Cablevision soared 18 percent on Wednesday on speculation that it could be a takeover target. And one trader found a way to make a large amount of money on the name in a matter of hours.

The cable giant's stock rallied strongly after a flurry of acquisition activity in the industry. On Wednesday, it was reported Europe's Altice was in talks to buy Time Warner Cable on the same day it announced paying over $9 billion to acquire Suddenlink. Only two days before, Charter Communications moved ahead with its plans to purchase Bright House for $10.4 billion.

With excitement in the cable sector brewing, the markets looked to Cablevision as a potential acquisition target and investors began buying the stock vigorously. Along the way, one trader found a way to make a lot money in the stock's options in a very short amount of time.

Within the first hour of trading Wednesday morning, when the stock was trading around $22.60, the trader purchased 1,000 of the December 22-strike calls for $2.50 each. Since each contract controls 100 shares, the trader wagered $250,000 that the stock would trade above $24.50, or 8 percent higher, in the next seven months. A call is a bullish bet giving the purchaser the right to buy a stock at a set price within a given timeframe.

However, the trader didn't have to wait until December to receive a huge gift from the markets.


Cablevision headquarters is shown in Bethpage, N.Y.
Jin Lee | Bloomberg | Getty Images
Cablevision headquarters is shown in Bethpage, N.Y.

The stock steadily rose throughout the day and in the last hour of trading, the trader sold out of the December 22-strike calls for $3.80 each. Thus the trader made profit of $130,000, or 52 percent, in just 5 ½ hours.

According to options expert Dan Nathan, co-founder of RiskReversal.com, the trader was content to take profit rather than hold the position until expiration.

"This trader is obviously saying, 'You know what? I had a good entry here. I'm going to take my money on an 18 percent up day and move on,'" said Nathan, a CNBC contributor.

On Thursday morning, Cablevision's stock was down 2 percent to $24.15, or 45 below the option's break-even price.

Before Wednesday's spike, the cable company's stock was up 22.5 percent over the previous 12 months.

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    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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