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February 12, 2013  Tue 12:17 PM CT

CTL: SEE CHART GET CHAIN FIND STRATEGIES
CenturyLink reports earnings tomorrow afternoon, but the bulls are jumping in today.

optionMONSTER's Heat Seeker trade scanner detected the purchase of about 2,600 February 42 calls against previous open interest of 1,806 contracts. Premiums rose from $0.25 to $0.35 as the trades crossed, which shows the buying pattern.

Long calls lock in the entry price for a stock, so they can generate some nice leverage in the event of a rally. If CTL climbs just 3 percent to $43, for instance, those calls will roughly triple in value.

Investors use these options rather than buying stock directly because they're so cheap, which effectively limits the amount of capital at risk and makes it easier to manage a long position. (See our Education section for more on how options can make you a better trader.)

CTL is up 0.5 percent to $41.72 in afternoon trading. The Louisiana telecom, which has a dividend yield of more than 6 percent, is back near a level that's been resistance since May 2011.

Total option volume is more triple the daily average so far today, with calls dominating the activity.
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So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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