Options Trading News

October 11, 2012  Thu 1:47 AM CT

Nerves were on edge in Huntington Bancshares yesterday, with the stock near long-term highs and the broader market selling off.

optionMONSTER's Depth Charge monitoring system detected the purchase of more than 5,700 April 7 puts for $0.53. The volume was 11 times the open interest of 499 contracts in the strike at the beginning of the day, so this is clearly a new position.

The investors now have the right to sell shares in the Ohio-based regional bank for $7 in the next half-year, regardless of how low they fall. This protective hedge precludes the need to sell stock and keeps the traders in the game for more upside if shares continue to climb. (See our Education section for more on how options can be used to manage risk.)

HBAN fell 0.28 percent to $7.08 yesterday but is up 29 percent so far this year. It's been consolidating above the same price range that was resistance since early 2011. Most chart traders would probably consider that bullish, but they may still fear a drop if the S&P 500 heads lower.

The company is also scheduled to report third-quarter results next Thursday, Oct. 18.

Overall option volume was 6 times greater than average in the name, with puts outnumbering calls by more than 130 to 1.
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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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