Options Trading News

March 22, 2013  Fri 4:45 AM CT

Lockheed Martin has been rising steadily this month, and one large trader is looking for the aerospace company to fly even higher.

optionMONSTER's Heat Seeker system yesterday detected the sale of 8,000 April 92.50 calls mostly for $1.35 and the purchase of 8,000 June 97.50 calls for $0.90. Volume was below previous open interest in the first strike but above it in the second.

This indicates that an investor is rolling the nearer-dated calls to a higher strike, reflecting the recent rise in Lockheed's stock price, while acquiring an additional eight weeks for the trade to work. He or she probably collected profits on the April contracts and is using some of the proceeds to buy the June calls.

LMT fell 0.61 percent yesterday to close at $91.68, just under its 10-day moving average, after coming into the month below $88. The stock had spiked to $96.52 in late January, its highest intraday price since October 2008, after its fourth-quarter report. The defense contractor will hold its annual shareholders meeting on April 25.

The new long calls opened yesterday, which lock in the price where shares can be bought, are looking for LMT to rise above $97.50 by mid-June. They could be sold earlier at a profit if the stock rallies before then but will expire worthless if shares remain below that strike price. (See our Education section)

Total option volume in LMT was just shy of 23,500 contracts yesterday, compared to a daily average of 3,377 for the last month. Calls outnumbered puts by 5 to 1.
Share this article with your friends

Invest Like a Monster - San Antonio: October 9-10

Premium Services

Archived Webinar

Education & Strategy

Options Academy: Ron's Risk Calculation--A Real Life Example

It is rare that I get a chance to give a real-life, real-time example in my articles that the readers were not only following but were actually involved in at the time the event is happening. Well, that is where we are right now in our QQQ trade from last week. Let's recap the trade itself.

View more education articles »