Options Trading News

November 12, 2013  Tue 9:37 AM CT

Dendreon is trying to rebound from a multi-year selloff, but major doubts remain.

optionMONSTER's Depth Charge monitoring system detected the purchase of some 10,000 January 2.50 puts, most of which priced for $0.48. Volume is almost triple previous open interest at the strike, indicating that new trades were initiated.

Puts lock in the price where shares can be sold in the drug maker, which has been falling steadily for more than two years. Investors use the contracts to hedge long positions or to speculate on a drop. (See our Education section)

DNDN is up 4 percent to $2.60 in morning trading but at one point was up as much as 9 percent. The gains come after management said it would cut costs amid declining sales for its key Provenge cancer drug. The product has been hampered by its high costs and uncertainty about reimbursements.

Total option volume is almost twice the daily average so far in the session, according to the Depth Charge. Puts outnumber calls by a bearish 5-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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