Options Trading News

August 21, 2013  Wed 4:14 AM CT

Ericsson has been trading sideways since spring, but one investor is holding out hope for a rally by early next year.

optionMONSTER's Heat Seeker system shows that a trader sold 8,000 October 13 calls for $0.20 and $0.15 while buying 5,000 January 13 calls for $0.55. Volume was below previous open interest in the October strike but above it in the January contracts.

This indicates that the trader is selling the nearer-dated calls and rolling the position forward by three months, essentially buying more time for the upside play to work. The new long calls are looking for ERIC to rally by mid-January but could expire worthless if shares remain below $13. (See our Education section)

ERIC rose 0.25 percent yesterday to close at $12.17. The Swedish cellphone and telecom-equipment company has erased all of its losses since gapping lower after earnings results on July 17, but it has been unable to break through resistance at the $12.30 level that goes back to mid-May. Shares have not traded above $13 since March.

Total option volume in the name was just shy of 18,000 contracts yesterday, nearly 31 times its daily average for the last month. Overall calls outnumbered puts by more than 16 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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