Call-Spread Selling in Virgin Media

CHICAGO (TheStreet) -- With Virgin Media(VMED Quote) scheduled to announce third-quarter earnings figures on Oct. 29 before the market opens, at least one investor sold call spreads and anticipates limited upside throughout the rest of the year.

Shortly after the opening bell sounded, the investor sold the in-the-money Jan. 12.5 call and bought the near-the-money Jan. 15 call to collect around $1.38 per spread with the stock trading around $14.58.

About 11,000 of these options have hit the tape so far today, trading in large blocks to indicate this was the work of one investor. The Jan. 12.5 calls are home to current open interest of 20,000 contracts, and the Jan. 15 calls were home to current open interest of 3,900 contracts heading into today's trading.

The Jan. 12.5 calls are currently trading up 17 cents on the day with a delta of 78, and the Jan. 15 calls have climbed 13 cents so far with a 50-delta.

The call spread seller could make a maximum profit of $1.38, which is the credit collected, and needs VMED shares to be trading below $12.50 at January expiration to keep this full premium. The maximum risk on this call spread is $1.13.

Analysts expect VMED to announce a 17-cent earnings-per-share loss on Oct. 29, which is a slight improvement from the 22-cent EPS loss the company reported in July. VMED shares are currently trading up 28 cents on the day.

The stock has seen a 279% rally since its March lows of around $3.90 per share. Following a steady run in VMED shares, at least one investor is calling for limited upside throughout the remainder of the year, forecasting that VMED shares will expire below $13.88 in January.

-- Written by Jud Pyle in Chicago