Options Trading News

December 4, 2013  Wed 5:16 AM CT

Upside option trading hit VMware early yesterday as buyers looked for the tech stock to rally in coming weeks.

optionMONSTER's Heat Seeker system shows that about 3,000 December 82.50 calls traded for $0.75 in the first few minutes of the session, then kept on buliding throughout the day. Some 8,500 would change hands by the closing bell in volume well above the strike's previous open interest of 2,120 contracts, going for premiums as high as $1.20.

These long calls lock in the price where the stock can be purchased no matter how far it might climb, letting investors cheaply position for a move higher. The contracts can generate significant leverage if a rally unfolds but will expire worthless if shares remain below $82.50 through mid-December. (See our Education section)

VMW was down at $79.25 at the time of the initial call buying but then reversed higher and closed the session up 0.69 percent to $80.06. The data-storage infrastructure and virtualization-technology company was near $90 in September.

Overall calls in the name outnumbered puts by 12,300 to 1,500, reflecting the session's bullish bias. Total option volume was quadruple its daily average in the last month.

Disclosure: I own VMW shares.

(A version of this post appeared on InsideOptions Pro yesterday.)
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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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