Options Trading News

September 6, 2013  Fri 5:16 AM CT

The bulls came back to Cheniere Energy after a long hiatus yesterday, and the move paid off almost instantly.

optionMONSTER's Heat Seeker system lit up with unusual activity in the October 34 calls late yesterday morning, with traders snapping up big chunks for $0.23. We immediately flagged the trades in our chat room and via email to our subscribers, and it was a good thing we hurried.

Barely 10 minutes later, buy orders started hitting the stock, driving it up $1 from its level when the calls appeared. Those October 34s more than doubled to $0.50 in the process.

The long calls lock in the price where shares can be purchased in the natural-gas tanker company, letting investors cheaply control moves to the upside. And that's exactly what happened yesterday. (See our Education section)

LNG ended the session up 4.2 percent to $30.04. Few names have seen option activity as lucrative as Cheniere has in recent years, providing winner after winner as the stock ascended in 2011 and 2012. One trade early this year quadrupled in value by March.

More than 32,000 of those October 34 calls would change hands by the end of yesterday's session, dwarfing previous open interest of just 12 contracts. Total option volume was 20 times greater than average in the name.

(A version of this post appeared on InsideOptions Pro yesterday.)

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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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