Options Trading News

June 12, 2013  Wed 4:45 AM CT

Agilent Technologies has been consolidating after a big move, and now the bulls are back.

optionMONSTER's tracking systems detected the purchase of 10,000 November 47 calls for $2.10 and the sale of a matching number of November 41 puts for $2.02. Volume was more than 80 times the previous open interest at each strike, indicating new activity.

The put sale generated income, lowering the cost of the long calls to just $0.08. That creates the prospect of massive leverage if the maker of scientific equipment pushes higher by the autumn, but it also creates the risk of significant losses with the short puts. (See our Education section)

A fell 0.56 percent to $44.48 yesterday. It gapped higher last month after a strong earnings report and touched its highest price in 22 months before retreating along with the rest of the market.

The stock is now trying to hold the same range that had been resistance from early 2012, which could be leading some chart watchers to think that it will continue to rally. Yesterday's combination trade effectively programs a buy order at $41 if it tests that level. Given that the trader likes the name, he or she would probably be willing to own it for that price as well.

Total option volume was more than 11 times greater than average in the company during the session.
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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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