Options Trading News

September 26, 2012  Wed 3:16 AM CT

Level 3 Communications attracted bullish option activity yesterday.

optionMONSTER's Heat Seeker system shows that 7,000 March 26 calls traded in a strong buying pattern, including a single print that went for $2.20. Open interest in the strike was a mere 12 contracts at the beginning of the day, so these are new purchases.

LVLT fell 1.5 percent yesterday to close at $22.96. The broadband-data company ran from below $18 in late July to resistance near $25 in mid-September and has been drifting lower since then.

If the long calls purchased yesterday are held until expiration in mid-March, the stock would need to gain roughly 23 percent for those contracts to make money. Their premiums could rise before then, however, allowing traders to profit from those calls early and exit the position. (See our Education section)

Total option volume in the name was 11 times its daily average. Calls outnumber puts by a bullish 55 to 1.
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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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