Options Trading News

June 7, 2012  Thu 4:08 AM CT

Traders have been selling Waste Management, but one man's trash could be another's treasure.

optionMONSTER's tracking programs detected a block of more than 21,000 October 34 calls purchased for the $0.80 offer price. The volume of that trade was more than 10 times the previous open interest in the strike, so this is clearly a new position.

Those calls lock in the price investors must pay to buy shares in the garbage-disposal company. They can generate major leverage in the event of a rally and double if the stock climbs just 10 percent in the next four months, but they will expire worthless if it doesn't move. (See our Education section)

WM rose 1.44 percent to $32.30 yesterday. It peaked around $36 in mid-April and is now trying to trying to find support around $32.

Total option volume in WM was 10 times greater than average in the session. Calls outnumbered puts by a bullish 15-to-1 ratio.

(A version of this post appeared on InsideOptions Pro yesterday.)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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