Options Trading News

December 11, 2013  Wed 10:10 AM CT

A trader is positioning for lower prices for the iShares iBoxx Investment Grade Corporate Bond Fund.

optionMONSTER's Depth Charge system detected the purchase of 3,000 January 113 LQD puts for the ask price of $0.70. The volume dwarfed previous open interest of just 22 contracts and the total daily average of 205.

The put buying isn't tied to any trading in the underlying that we can see, though it could be a hedge on an existing long position in the LQD. Alternatively, it could be an outright bearish bet that the exchange-traded fund will head back to its September lows. (See our Education section)

The LQD is down fractionally to $114.09 this morning, in the middle of its recent range. It was below $113 last in September as it came off the 52-week low of $110.73.
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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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