Options Trading News

August 30, 2013  Fri 9:21 AM CT


Someone is getting long Ciena today before the communications company reports earnings next Wednesday.

optionMONSTER's Heat Seeker monitoring program show that more than 10,000 CIEN options already trade, triple the daily average over the last month. One big investor purchased 2,500 of the January 2014 22 calls for the ask price of $1.76. At the same time they sold 2,500 of the 30 calls for $0.28 -- completing a vertical spread -- plus 2,500 of the 18 puts for $1.48 to further offset the cost of the trade.

The combination strategy cost nothing to implement, so the trader has no risk if CIEN remains between $18 and $22 at expiration. The maximum gain of $8 comes if it is at or above $30. The risk is that the stock falls below $18. (See our Education Section for more.)

CIEN fell 0.84 percent to $20.14. It was at a high of $23.63 in the first week of August. Shares gapped up through $18 in early June, and they haven't fallen back near that level since.

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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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