Options Trading News

May 13, 2013  Mon 3:16 AM CT

Take-Two Interactive Software has broken a key level, and the bulls think there is no going back for the video-game maker.

optionMONSTER's Heat Seeker monitoring show that a trader sold 7,500 June 16 puts for $0.875 and bought an equal number of June 16 calls for $1. Volume was more than 7 times the previous open interest at each strike, indicating that new money was put to work.

The position cost just $0.125 and is highly leveraged to gains in shares of the company, which reports fourth-quarter earnings this afternoon. The last release in March beat expectations on the top and bottom lines, propelling the stock higher.

If TTWO closes below $16 on expiration, the investor will face the obligation to buy stock at that level, and they'll be losing money. But above that level the trader stands to earn huge profits, with a gain of 700 percent in the calls if the stock moves only to $17. (See our Education section for more on the dynamics of put selling and call buying.)

TTWO rose 2.81 percent to $16.44 on Friday and has more than doubled since last August as years of negativity abate in the video-game industry. The stock struggled at $16 in March and April but found support above that level last week. Some chart watchers could view that price action as bullish.

Total option volume was 70 times greater than average in the session, according to the Heat Seeker.
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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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