Options Trading News

September 26, 2013  Thu 4:45 AM CT

Energy has been a constant theme, and now the bulls are noticing pipeline operator Transcanada.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 5,000 November 32 calls for $0.94 to $1 yesterday against previous open interest of just 7 contracts. Almost all the volume occurred in the last five minutes of trading, suggesting that it was the work of at least one large institutional investor.

These long calls lock in the price where shares can be bought in the Calgary-based company. Investors use these options to prevent the stock from running away from them and to leverage otherwise small moves in the underlying price. (See our Education section)

TRP fell 0.5 percent to $44 yesterday after rebounding late in the session on heavy volume. It's been weak all year but is now attempting to hold the same $44 level where it hit resistance several times in late 2011 and early 2012.

The stock resembles NuStar, a refining and transportation name that's been climbing after appearing on the Heat Seeker last week. The NS December 40 calls, first cited for $0.55, closed yesterday worth $1.90. There was also bullish activity in Canadian Natural Resources late in the afternoon.

Total option volume in TRP was 37 times greater than average yesterday. Calls outnumbered puts by more than 1,000 to 1.
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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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