Options Trading News

April 16, 2013  Tue 10:58 AM CT

The SPDR Oil & Gas Exploration & Production Fund is bouncing a day after posting its lowest close in more than three months, but one trader is positioning for another leg lower.

optionMONSTER systems show that more than 4,000 each of the April 56 and May 54 puts traded in unison. The big prints of 3,182 moved together, with the 56 puts sold for the bid price of $0.98 in volume below previous open interest of 14,870. The 54 puts were bought for the ask price of $1.28 against open interest of just 216 contracts, clearly indicating a new position.

Given the data and the market action, this appears to be a trader rolling a long-put position one month later and to a lower strike that is out of the money. This also could very well be part of a hedging strategy. (See our Education section)

The XOP is up 1.5 percent to $56 even in midday trading after posting its lowest close since Jan. 9 yesterday. The exchange-traded fund was above $62 at the highs of a month ago.
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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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