OptionsHouse

Options Trading News

February 19, 2013  Tue 12:22 PM CT

VOD: SEE CHART GET CHAIN FIND STRATEGIES
Vodafone is down again today, and once again the bulls are stepping in.

optionMONSTER's tracking systems detected the purchase of 10,000 July 27 calls for $0.55. An equal number of July 23 puts was sold at the same time for $0.69.

The investor collected a small credit of $0.14, but the real money will be made to the upside. Should the global telecom rally, the calls owned will appreciate in value while the puts sold short will dwindle. If it fails to move, they'll keep the $0.14 and the position will expire worthless.

He or she is using the options to place a cheap bet on a rebound in the stock.  They can only lose money if it closes below $23 on expiration--a level it hasn't breached in more than two years. (See our Education section for more on how options can be more effective trading instruments than common equity.)

VOD fell 2.37 percent to $25.33 in afternoon trading after getting downgraded to "underweight" at Bernstein. The stock is now back to a price area that's been support since late 2010, which could make some chart watchers believe that it will hold its ground or rebound.

Buyers have already played this level, piling into calls several times last month in hope of a bounce. Some of them more than doubled their money in the trades.

That bullish combination trade has pushed total volume in VOD to twice the daily average so far today.

Share this article with your friends


OptionsHouse

Premium Services

Education & Strategy

The Movement of Delta

In our last column, we spoke about delta. You might remember that we discussed what delta was and what factors affected or changed delta. As you recall, we stated that three factors will have an effect on delta. They were movements of time, volatility, and underlying price. Today, we want to take a further look into the change of delta, this time focusing on change due to the movement in the underlying price. 

View more education articles »