Options Trading News

June 11, 2013  Tue 4:45 AM CT

A trader is betting on a big rally in Western Union by early next year.

optionMONSTER's Heat Seeker system detected the purchase of 2,500 January 20 calls in a single print for $0.30. This is clearly a new position, as the volume was well above the strike's open interest of 1,622 before the trade appeared.

This bullish call buying, which locks in the purchase price of the stock, is looking for WU to rise above $20.30 by mid-January. The options could be sold earlier at a profit if their premiums rise with a rally before then, but they will expire worthless if the shares remain below the $20 strike price. (See our Education section)

WU rose 0.84 percent yesterday to close at $16.79. The money-transfer company spiked higher on May 1 after quarterly earnings beat estimates but has been range-bound for the last month.

Raymond James upgraded the name to "outperform" with a $19 target price yesterday, while Macquarie gave it a "neutral" rating with a $17 target accompanied by bullish commentary. Western Union is scheduled to present at the William Blair & Company's Growth Stock Conference on Thursday.

Total option volume in WU was 4,380 contracts yesterday, double its daily average for the last month. Calls outnumbered puts by a bullish 13-to-1 ratio.
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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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