Options Trading News

June 4, 2013  Tue 4:14 AM CT

The bulls are coming back to Capstead Mortgage, which has fallen along with other REITs in the last month.

optionMONSTER's Heat Seeker scanners showed the purchase of almost 5,900 July 12.50 calls in the real-estate investment trust for $0.25 and $0.30. Previous open interest was just 137 contracts, so new money was definitely being put to work.

These calls lock in the price where shares can be purchased, which can givce them potentially significant leverage if the stock rallies. They also limit the amount of money that can be lost in the event of a pullback. (See our Education section)

CMO was down almost 1 percent when the paper hit but then worked higher and closed the session up 0.41 percent to $12.33. Shares had peaked over $13 in early May.

The company offers a dividend yield of 10 percent and trades for less than book value, which could be attracting some bargain hunters. Total option volume was 60 times greater than average in the session, with calls outnumbering puts by more than 100 to 1.

(A version of this post appeared on InsideOptions Pro yesterday.)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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