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April 12, 2013  Fri 9:38 AM CT

GIS: SEE CHART GET CHAIN FIND STRATEGIES
One investor is adjusting a winning trade General Mills, which has gone parabolic this year.

optionMONSTER's Heat Seeker tracking program detected the purchase of 4,000 October 55 calls for $0.26 and the sale of an equal number of October 50 calls for $1.44. Volume was below open interest in the 50s, indicating that an existing position was closed and rolled to the higher strike.

The trader collected a credit of $1.18 and still has the potential to make bigger profits if the food company keeps climbing. He or she probably entered the trade when the shares were lower and has now recovered the initial investment plus some profits. (See our Education section for more on how options can be used to manage positions.)

GIS is up 0.02 percent to $49.27 in morning trading. It spent about three years trapped between $34 and $40 but is up more than 20 percent since escaping that range in early January.

Total option volume is still below average in the stock today, but calls outnumber puts by a bullish 94-to-1 ratio.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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