Options Trading News

December 12, 2012  Wed 5:16 AM CT

Harley-Davidson is trying to bust out of its current range, and the bulls piled in yesterday.

optionMONSTER's Heat Seeker tracking system detected the purchase of almost 5,300 December 48 calls against open interest of 571 contracts yesterday. The first blocks priced for $0.30, but premiums then rose as high as $0.93 as the iconic motorcycle stock climbed, which shows the kind of leverage that can be achieved with options.

Long calls lock it the price where investors can buy stock, so they can make huge moves on a percentage basis from a modest gain in the underlying share price. But these options will expire worthless if the stock doesn't go in the right direction quickly enough. (See our Education section)

HOG rose 2.06 percent to close at $47.62 yesterday. It's been trapped below $48 since late June, so yesterday's call buyers are looking for that resistance to give way by expiration at the end of next week.

Total option volume was almost 10 times greater than average in the session. Calls outnumbered puts by a bullish 37-to-1 ratio.

(A version of this post appeared on InsideOptions Pro yesterday.)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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