Options Trading News

December 6, 2013  Fri 12:20 PM CT

Zoetis was spun off from Pfizer early this year, and one big investor thinks the animal spirits are ready to take over.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 3,000 July 33 calls for $1.90 and the sale of 3,000 July 27 puts for $0.95. A block of 3,000 January 32 calls were sold for $0.70, but volume was below open interest in those.

The investor apparently owned the January 32 calls in hopes of a rally and rolled the position into the July combination spread. Making the adjustment cost a net $0.25 and provides an additional six months of upside exposure. But the trader also carries the risk of having to buy shares if they fall under $27, which is more than $1.50 below the stock's 52-week low. (See our Education section for more on the benefits and perils of selling puts.)

ZTS is up 0.62 percent to $31.64 in afternoon trading. The maker of veterinary medicines went public for $26 in February but leapt higher and has traded between $29 and $34 since then. Its last three earnings reports have beaten estimates, and the shares are trying to consolidate above their 100-day moving average. That could make some chart watchers think that they're ready to run higher.

The Heat Seeker shows total option volume at 18 times greater than average so far today, with the bullish three-way trade accounting for almost all the activity.
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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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