Options Trading News

December 19, 2012  Wed 2:14 AM CT

Quicksilver Resources has seen its stock price cut in half this year, and a long-term trade is positioning for another steep drop.

optionMONSTER's Depth Charge system shows that 4,100 January 2014 3 puts were purchased for $0.85, led by single print of 3,800 contracts. The volume was 12 times the strike's open interest of just 348 contracts at the beginning of the day, so this is clearly fresh buying.

The put buying wasn't tied to any stock trades identified by our systems yesterday, but they could have been a hedge on a long position established earlier. If not, the trader could be making a straight bearish bet that KWK will plunge roughly 37 percent by expiration in 13 months. (See our Education section)

KWK rose 0.89 percent to close yesterday at $3.40 after hitting an intraday high of $3.57. The shares touched their 50-day moving average in the session for the first time since late October before pulling back. The independent oil and gas company came into 2012 above $7 but has been trending lower all year.

Total option volume in the name was 7 times its daily average for the last month. Puts outnumbered calls by 11 to 1, an indication of the session's bearish sentiment.
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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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