Options Trading News

January 24, 2013  Thu 12:20 PM CT

Vodafone has already made some traders some quick profits, and now the bulls are coming back for more.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 15,000 July 27 calls for $1.05 and the sale of an equal number of July 24 puts for $0.58. Volume was more than triple open interest at each strike, indicating that new positions were initiated.

The trade follows repeated upside activity since the start of the year, the most recent of which produced gains of about 60 percent in a matter of days.

Today's strategy cost $0.47 and is similar to owning shares in the global telecom giant. The long calls will appreciate and the short puts will lose value if VOD climbs, while the opposite will happen to the downside. The benefit of using the options is that it requires much less capital than owning shares, while programming a buy order for $24 if it drops to that level. (See our Education section)

VOD is up 2.55 percent to $26.77 in afternoon trading. Shares double-bottomed near $25 late last year and then pushed higher on speculation that the company would sell its 45 percent stake in Verizon Wireless.

The company is scheduled to report quarterly results on Feb. 7.

Total option volume is almost 5 times greater than average so far today, according to the Heat Seeker.
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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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