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June 4, 2013  Tue 3:47 AM CT

TWO: SEE CHART GET CHAIN FIND STRATEGIES
One trader is betting that Two Harbors Investment will rebound in coming months.

optionMONSTER's Heat Seeker system detected the purchase of 3,010 September 12 calls in less than a minute yesterday, led by a print of 2,462 that went for $0.23. This is clearly a new position, as the volume was well above the strike's open interest of 1,417 contracts before the session began.

These long calls lock in a purchase price of $12.23 for the stock no matter how far it might rise. However, the contracts will expire worthless if the shares remain below $12 through mid-September. (See our Education section)

TWO, which fell 2.18 percent to $10.79 yesterday, has been hit hard along with other real-estate investment trusts in the last month. The stock spiked above $12 after its first-quarter earnings report on May 8 but has been declining steadily ever since, falling below its 200-day moving average last week.

Total option volume in the name yesterday was 6 times its daily average for the last month. Calls outnumbered puts by more than 11 to 1, a reflection of the session's bullish sentiment.
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So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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