Dan Nathan's Risk Reversal Sprint Trade

Speaking on CNBC's Options Action, Dan Nathan suggested a risk reversal call spread strategy in Sprint Corp S.

He explained that there are some rumors of a possible takeover and in case the stock moves higher, he wants to participate in the upside with a risk reversal call spread. Nathan wants to sell the January 7 put for $0.80, buy the January 10 call for $1 and sell the January 15 call for $0.20.

The trade is going to make money if the stock trades above $10 at the January expiration and it can make a maximal profit of $5. If the stock drops below $7 at the January expiration the trade is going to lose money.