Options Trading News

August 7, 2013  Wed 12:20 PM CT

Omnicare has seemed unstoppable recently, and traders are looking for more.

optionMONSTER's Heat Seeker monitoring system detected the purchase of more than 2,700 September 60 calls, most of which priced for $0.30. These are all new positions, as there was no open interest at the strike before the trades appeared.

The long calls lock in the price where shares can be purchased in the health-care company, which is already up 53 percent so far this year. Investors use the contracts to obtain cheap upside exposure, preventing them from missing a rally while limiting potential losses in a pullback. (See our Education section for more on how options can be used to manage risk.)

OCR is up 2.04 percent to $55.40 in afternoon trading, down slightly from an all-time high of $55.85 reached earlier in the session. The stock has been riding a wave of strong earnings reports as business grows and generic drugs help contain costs.

Total option volume is more than 15 times greater than average so far today, according to the Heat Seeker. Calls outnumbered puts by a bullish 18-to-1 ratio.
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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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