Learn the trade here. Make it on tradeMONSTER

Options Trading News

September 25, 2013  Wed 4:14 AM CT

EXP: SEE CHART GET CHAIN FIND STRATEGIES
Eagle Materials is near all-time highs, and the bulls are looking for a breakout.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 3,000 January 72.50 calls for $5.50. Equal-sized blocks were sold at the same time in the January 62.50 puts for $2.25 and the January 82.50 calls for $1.80. Volume was more than 24 times open interest at all three strikes, indicating that new positions were initiated.

The overall trade cost $1.45 and will expand to $10 if the maker of wallboard and cement closes at or above $82.50 on expiration--a potential profit of some 590 percent. The trader also faces potential losses to the downside because of the sold puts.

EXP rose 3.10 percent to $71.84 yesterday. It more than tripled between late 2011 and early this year but has been churning in a range since. The stock bounced near its 200-day moving average at the start of August and is now sitting near its previous record highs from 2005.

Yesterday's option strategy combines short puts with a bullish call spread to enhance leverage. The fact the trader wrote puts at $62.50 also reflects a belief that there isn't much risk of a drop below that level. (See our Education section for more.)

Some 11,000 contracts changed hands in the session, more than 50 times average amounts.
Share this article with your friends


TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Education & Strategy

Options and high-frequency trading

There has been much talk lately of high-frequency trading (HFT) and what it does--or doesn't--mean to the markets and retail...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER