Options Trading News

October 17, 2013  Thu 12:20 PM CT

Traders are tuning in for new highs in satellite-television provider DirecTV.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 1,900 November 65 calls for $0.68 and the sale of an equal number of November 70 calls for $0.08. Volume was more than twice open interest at both strike, indicating that new money was put to work on the long side.

The trade cost $0.60 and will earn a profit of 733 percent if the stock closes at or above $70 on expiration. (See our Education section for more on the strategy, which is known as a bullish call spread because it leverages a move between two prices.)

DTV has been consolidating between $58 and $66 for the last six months and is up 1.02 percent to $61.97 in afternoon trading today. It's never traded over $68, so today's option trade is looking for the stock to establish new record levels within the next month.

The company has mostly benefited from strong growth in Latin America, though its last earnings report in August missed expectations. The next set of numbers comes out on Nov. 5, which could send the shares to new highs.

Total option volume is more than twice the daily average so far in DTV, according to the Heat Seeker. Calls outnumber puts by nearly 4 to 1.
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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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