OptionsHouse

Options Trading News

February 1, 2013  Fri 4:14 AM CT

P: SEE CHART GET CHAIN FIND STRATEGIES
Pandora Media is up nearly 50 percent in the last two months, and one trader is reloading for further gains.

A trader sold 5,000 March 12 calls for $1.05 and bought the same number of March 14 calls mostly for $0.50, according to optionMONSTER's Heat Seeker tracking system. The March 12s were below previous open interest while the March 14s were above it.

This indicates that the investor is closing an initial long-call position and opening a new one at a higher strike price as the stock continues to climb. The trader probably made a profit on the earlier contracts and is now looking for Pandora's shares to rise above $14.

The long calls lock in the purchase price of the stock no matter how high it may rise, so they can provide significant leverage in a rally. But these options will be worthless if the stock is below the $14 strike price by expiration in mid-March. (See our Education section)

P rose 1.22 percent yesterday to close at $11.60. The online-radio service gapped below $8 in early December after issuing weak guidance, but shares have been climbing sharply since then and are now back near the high end of their range for much of 2012.

Yesterday's call roll pushed total option volume in the name to 13,883 contracts, nearly triple its daily average of 4,902 in the last month. Only 357 puts traded in the entire session, a reflection of the bullish sentiment.
Share this article with your friends


Related Stories

P

Calls are tuning into Pandora Media

May 31, 2016

The Internet-radio network gapped higher on May 17 after hedge fund Corvex disclosed a 9.9 percent stake in the company and urged management to explore a sale.

P

Pandora Media draws huge call volume

May 18, 2016

The Internet-radio network gapped higher yesterday after hedge fund Corvex disclosed a 9.9 percent stake in the company and urged management to explore a sale.

OptionsHouse

Premium Services

Education & Strategy

Volatility and the Option Pricing Model

OptionsĀ are derivatives of underlying assets and can be boiled down to a mathematical formula. As such, the value of an option is determined by a formula calledĀ the Options Pricing Model.

View more education articles »