Options Trading News

April 23, 2014  Wed 3:16 AM CT

Traders are apparently betting that Genworth Financial will pop after its earnings report next week.

More than 2,500 May 18 calls were bought for $0.30 to $0.50 yesterday, according to optionMONSTER's Heat Seeker tracking system. The volume was well above the strike's previous open interest of 878 contracts, indicating that new positions were opened.

These long calls lock in the price where the stock can be purchased through mid-May no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $18. (See our Education section)

GNW gained 4.67 percent yesterday to close at $17.69. The stock hit $18.58 with heavy call buying on April 3--its highest price since April 2010--but pulled back with the broader market until bouncing off the $16 level last week.

The company, which offers insurance and investment services, is scheduled to announce quarterly results on April 29 after the market closes. The May options expire about 2-1/2 weeks after that.

Total option volume in GNW topped 8,800 contracts, double its daily average for the last month. Overall calls outpaced puts by more than 6 to 1, a reflection of the session's bullish sentiment.
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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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