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Options Action Recap: Blockbuster Trade on LGF, BAC
CNBC.com | March 26, 2012 | 04:18 PM EDT

We all know the stunning statistics about: Lions Gate’s "The Hungry Games"; third biggest open, best March opening, a global weekend haul of $214 million worldwide.

What people may not know is that the bearish options trade we recommended has been put up in equally impressive size today.

Based on Oppenheimer’s Carter Worth dim view of the stock’s stunning surge, CRT Capital Mike Khouw suggested buying the April/May put calendar for $0.30. Specifically, Khouw suggested selling the April 13-strike put for $0.60 and using that money to buy the May 13-strike put for $0.90.

The goal of this trade is to have (LGF) stock trade just above the strike of the first call that was sold, but below the strike of the longer-dated call that was bought, by more than the total cost of the trade, or below $12.70 by May expiration. Khouw’s trade and breakdown are below.

MIKE’S LIONS GATE OPTIONS TRADE

  • SELLING THE APRIL 13-STRIKE PUT FOR $0.60
  • BUYING THE MAY 13-STRIKE PUT FOR $0.90
  • HOW MIKE’S LIONS GATE TRADE MAKES MONEY

  • LOSSES ABOVE $12.70
  • PROFITS BELOW $12.70
  • (BY MAY EXPIRATION!)

    Our second trade centered on shares of Bank of America , which has also experienced a meteoric rise itself. Since BofA manages nearly a fifth of all U.S. mortgages, a bet on Bank of America is more or less a bet on the health of the U.S. economy.

    And as a bullish trade, Brian Stutland of Stutland Equities suggested buying the May 9/10 risk reversal for $0.15. Specifically, he suggested selling the May 9-strike put for $0.40 and using that money to buy the May 10-strike call for $0.55. His trade and breakdown are below.

    BRIAN’S BANK OF AMERICA OPTIONS TRADE

  • SELL MAY 9-STRIKE PUT FOR $0.40
  • BUY MAY 10-STRIKE CALL FOR $0.55
  • HOW BRIAN’S TRADE MAKES MONEY

  • PROFITS ABOVE $10.15
  • LOSSES BELOW
  • GET LONG AT $9.00
  • (BY MAY EXPIRATION)

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