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January 23, 2013  Wed 10:22 AM CT

ORLY: SEE CHART GET CHAIN FIND STRATEGIES
Heavy option trading in O'Reilly Automotive today is looking at potential downside.

optionMONSTER systems show that more than 80,000 ORLY options have already changed hands this morning, compared to a daily average of 1,400 in the last month. A three-way combination tops that volume.

A trader bought 14,200 February 95 calls for the ask price of $0.65 against open interest of more than 15,000. At the same time, he or she sold 17,500 May 100 calls for $1.30 and bought 17,500 May 80 puts for the ask price of $1.93. The volume at those two strikes was above open interest, so those were new opening positions.

It appears that the trader is rolling a short-call position to a higher strike in May while adding to the number of puts. This is likely done against long stock as a covered call converted to a collar. (See our Education section)

Shares of ORLY are up 1.08 percent to $89.66. The auto-parts retailer bounced off support at $80 in late October and was up against resistance at $95 in the first half of December.
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So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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