As mentioned in a recent post on TradeMonster, one of the key advantages of the Trademonster options trading platform is the access to OptionMonster trade commentary. Earlier this morning OptionMonster’s Heat Seeker tracking system detected bullish activity in American Tower (AMT) options. An options trader purchased October 45-47.5 1×2 ratio call spreads in AMT, 3000×6000 times. With shares of AMT trading around $42, this specific options trader is utilizing a ratio call spreads structure to express a moderately bullish view on AMT for very little cost (in this example no cost). A breakdown of the AMT 1×2 ratio call spreads trade is highlighted in the graph below:

As part of the trade the options trader purchased 3000 Oct 45 calls for $2.10 and sold twice as many Oct 47.5 calls at $1.05, net-net no premium outlay to put on this specific options trade. As highlighted in the graph above, the options trader loses nothing on the trade as long as shares of AMT trade at $50 or lower upon expiration. The options trader achieves maximum profitability (+$2.50) if shares of AMT trade at $47.50 upon expiration. The options trade begins to lose money with shares of AMT trading at or above $50 (+19% from current levels), so essentially the options trader is betting shares of AMT increase but not by more than 19% over the next few months. Maximum loss on this ratio call spreads options trade is unlimited as shares of AMT theoretically could increase to infinity.

With AMT recently providing a first quarter update, upside could very well be limited through the October time-frame.  So it doesn’t seem like a bad bet given there really is no downside to the options trade with shares of AMT trading below $50 at expiration. I keep stressing “at expiration” mainly because the paper P/L of the trade can vary wildly through the life of the trade depending on price action. For greater detail on how to manage ratio call spreads options trades as well as other options trading strategies visit OptionsUniversity.com.