Options Trading News

July 12, 2013  Fri 3:16 AM CT

A long-term trade in Mako Pharmaceuticals is looking for shares to run back to highs.

optionMONSTER systems show that 8,695 MAKO options changed hands yesterday, more than 10 times its daily average over the last month. Almost all of that was in a January 2015 call spread.

A trader bought 4,000 of the 17.50 calls for $1.65 and sold 4,000 of the 30 calls for $0.35. Volume was above the previous open interest at each strike, so this is new positioning.

The trader spends $1.30 on this vertical spread to get the exposure up to $30. The maximum gain if shares are at or above that level is $11.20. The delta of the higher-strike calls suggests a 13 percent probability that MAKO will be above that price at expiration. (See our Education section)

The stock rose 1.98 percent yesterday to close at $11.84. That is around the middle of its recent trading range, as shares have been trending up from a low of $10 in April. Shares were above $30 last May.
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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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