Options Trading News

November 29, 2012  Thu 3:16 AM CT

Traders turned bullish on Veeco Instruments yesterday as shares broke out of a recent range.

optionMONSTER's Heat Seeker system detected call buying in two strikes. About 1,600 December 30 calls were purchased as premiums more than doubled from $0.40 to $1, with volume that was 6 times higher than open interest and therefore new positioning. In addition, more than 1,000 December 29 calls traded as premiums jumped from $0.77 to $1.42 against open interest of 303 contracts.

VECO surged 7.66 percent yesterday to close at $29.46, almost reaching its 50-day moving average. The company produces equipment used to make light-emitting diodes, solar panels, and computer hard drives. Veeco held an industry conference in China on Tuesday, where it said the country "has demonstrated significant progress to drive policies that stimulate end market demand for LED lighting products."

Shares have fallen sharply since repeatedly failing to break through resistance at 52-week highs around $38, most recently in September, around the time that Goldman Sachs lowered its rating on the name to "sell" from "neutral." Veeco, which faces charges of securities law violations, gapped lower on Nov. 15 after reporting a delay in filing quarterly results and had been trading in an extremely tight range since then.

The calls bought yesterday lock in prices to buy the stock and are looking for the shares to make modest gains by expiration in less than a month. (See our Education section)

Overall option volume in the name exceeded 4,600 contracts, about 14 times its daily average of just 336 in the last month. Calls outnumbered puts by nearly 3 to 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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