Options Trading News

April 25, 2013  Thu 12:20 PM CT

One big investor apparently thinks that Talisman Energy is finally ready to turn around.

optionMONSTER's Heat Seeker monitoring system detected the purchase of some 20,000 October 13 calls for $0.615 and the sale of a matching number of October 10 puts for $0.475. Volume surpassed open interest at each strike, indicating that new positions were initiated.

The position cost $0.14 to open and is similar to owning shares in the Canadian oil driller. The calls will appreciate and the puts will lose value if TLM pushes higher, while the opposite will happen to the downside. Investors use the combination strategy because it allows them to control the equivalent of 2 million shares at a fraction of the cost. It essentially prevents them from missing a strong rally while also programming a buy order at the same $10 level where the stock bounced last year. (See our Education section for more on how options can be used to manage trades.)

TLM is up 1.64 percent to $11.81 in afternoon trading and has been moving sideways for more than a year. Energy stocks have mostly lagged in the last quarter but have been the strongest sector in the last week as investors bet on stronger economic growth in the second half.

Total option volume is more than 11 times greater than average in TLM so far today. First-quarter earnings come out on May 1.
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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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