Options Trading News

November 20, 2013  Wed 10:02 AM CT

The sentiment has turned cautious in Activision Blizzard, less than a week after big-money bulls piled into the video-game developer.

optionMONSTER's Depth Charge monitoring system detected the purchase of 5,000 December 15 puts for $0.07 to $0.10. Volume was more than 40 times the previous open interest at the strike, indicating that new positions were initiated.

These puts lock in the price where a stock can be sold, letting investors hedge against a pullback or speculate to the downside. But these contracts will expire worthless if shares remain above $15 through mid-December. (See our Education section)

ATVI is up 1.07 percent to $17.07 in morning trading. The game company gapped higher in late July after buying back shares from Vivendi at a discount but has been consolidating in a range ever since. There was also heavy short-term call buying last Thursday, Nov. 14, as investors looked for a run higher through next week.

More than 8,800 contracts have traded in the stock so far today, more than twice the daily average. Puts accounted for a bearish 90 percent of the total.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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