Options Trading News

October 11, 2012  Thu 4:12 AM CT

Traders turned bullish on Barnes & Noble yesterday.

optionMONSTER's Heat Seeker tracking system detected early buying in the October 14 calls for $0.55, with almost 1,200 contracts purchased in the first half-hour of trading. Volume exceeded open interest of 999 in the strike at the beginning of the day, indicating that new positions were initiated.

Later in the session, the trades were already paying off. As the stock surged as much as 12 percent, those October 14s almost tripled to $1.40. The book retailer ended the day up 8.18 percent at $14.94.

Calls lock in the price where investors can purchase shares. These options can generate significant leverage if the stock climbs, but they will lose most or all of their value in the absence of a rally. (See our Education section)

In another big trade during the afternoon, investors bought the January 16 calls for $1.60 and sold the January 21s for $0.30. This position cost $1.30 to open and will let them collect the $5 spread between the two strike prices if BKS goes to $21--a profit of 285 percent on a 40 percent in the share price.

Short interest is more than 25 percent of the float, which could trigger a big rally if those bears are forced to cover their positions.

Total option volume was times greater than average in BKS yesterday, with calls outnumbering puts by almost 2 to 1.

(A version of this post appeared on InsideOptions Pro yesterday.)
Share this article with your friends

Related Stories


Barnes & Noble draws put buying

September 11, 2015

Traders are buying September puts in the book retailer, which bounced yesterday after gapping down a session earlier with weak quarterly numbers.

Invest Like a Monster - San Antonio: October 9-10

Premium Services

Archived Webinar

Education & Strategy

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.

View more education articles »