Options Trading News

September 26, 2012  Wed 12:15 PM CT

Sentiment has been worsening in the energy space after a big run, and now the bears are hitting Concho Resources.

optionMONSTER's Depth Charge monitoring program detected the purchase of more than 1,000 December 95 puts for $7.10. Volume was more than 7 times previous open interest at the strike.

Owning those puts ensures the investor a minimum exit price of $95 for the independent oil-and-gas company. These options are in the money and will therefore provide significant leverage to a decline in the share price. Such contracts are usually used by investors as a speculative short rather than as a hedging strategy because of their high cost. (See our Education section)

CXO is down 2.66 percent to $93.48 this afternoon. The stock has been climbing since the summer along with most other energy companies, but performance and sentiment have worsened in the last two weeks amid increased worries about the global economy and Europe's debt crisis.

Oil service provide Superior Energy also saw downside trades earlier today. (See related story)

Overall option volume is about triple the average amount in CXO so far today. Puts account for almost two-thirds of the total, according to the Depth Charge.
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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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