Options Trading News

December 4, 2013  Wed 4:45 AM CT

Goodrich Petroleum has fallen sharply from four-year highs in the last two months, but traders are looking for shares to bounce.

optionMONSTER's Heat Seeker system found heavy buying in the January 20 calls, where about 6,900 contracts traded for $1.15 to $1.80 yesterday. The volume was well above the strike's previous open interest of 1,551 contracts, indicating that new positions were established.

These long calls lock in the price where traders can buy the stock through mid-January no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $20. (See our Education section)

GDP rose 3.58 percent yesterday to close at $19.36. The oil and natural-gas company broke out of a multi-month range in late July and ran up to $28.55 in October--its highest price since late 2009--but has been declining steadily since.

Total option volume in the name topped 15,600 yesterday, 8 times its daily average for the last month. Only 719 of those contracts are puts, a reflection of the session's bullish sentiment.
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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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