JNPR – Juniper Networks, Inc. – Shares in the maker of networking equipment are up sharply on Monday on news activist hedge fund Elliott Management Corp. has a 6.2% stake in the company. The stock increased as much as 10.3% near the open to touch $25.96 on the news and appears to have spurred a sizable bullish options trade in the January 2015 expiry calls and puts.
It looks like one trader sold 10,000 of the Jan ’15 $20 puts at a premium of $1.20 apiece to partially offset the cost of buying a 10,000-lot Jan ’15 $25/$35 call spread for a premium of $2.90 each. The net cost of the three-legged options trade amounts to $1.70 per contract, thus positioning the trader to make money in the event that Juniper’s shares rally another 3.0% over today’s high of $25.96 to exceed the effective breakeven point at $26.70. Maximum potential profits of $8.30 per contract are available on the trade should shares in Juniper Networks soar 35% to $35.00 by expiration next year.
