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February 5, 2013  Tue 5:15 AM CT

UPS: SEE CHART GET CHAIN FIND STRATEGIES
United Parcel Service has pulled back from this year's highs, but some bulls are hoping that it will deliver some profits.

optionMONSTER's Heat Seeker system detected a large institutional trade in the transportation and logistics company yesterday. A trading sold about 13,000 April 80 calls for $1.76 and rolled the position to the July 85 calls, which were bought for $0.86.

Long calls lock in the purchase price for the stock, so they can generate some nice leverage in the event of a rally. But these options will lose value if the shares don't rise within the designated time frame, so yesterday's trader adjusted his or her position to pick up another three months of upside exposure while looking for the stock to rise an additional $5. (See our Education section)

UPS was down fractionally yesterday to close at $79.91. It sold off hard in late December after failing to break above its 200-day moving but then ripped to a new January high before easing back from that level in recent days.

Overall calls in the name outnumbered puts by about 29,200 to 3,300 yesterday, a reflection of the session's bullish sentiment. Its total option volume was twice the average amount.

Disclosure:
I own UPS calls.

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

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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