Options Trading News

April 10, 2013  Wed 12:20 PM CT

One investor is using the leverage of options to boost a bullish bet on Republic Services.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,000 July 30 calls in the trash hauler for $3.40 to $3.50. Volume was more than twice previous open interest at the strike, indicating that this is fresh buying.

These long calls lock in a $30 entry price, about $3 below RSG's current level. That will provide significant upside leverage if the shares rally, amplifying even a small move in the stock.

For example, the trader will roughly double his or her money if the stock climbs just 10 percent to its previous all-time high of $36.52 from 2008. (See our Education section for other bullish strategies.)

RSG is up 1.65 percent to $33.24 in afternoon trading and is up 13 percent so far this year. The stock has been climbing despite a weak earnings report, with Credit Suisse noting that the company has the potential to convert itself into a real-estate investment trust.

That would lower its tax bill and follow similar moves by other companies in recent years--most of which have been cheered by investors. Republic's next earnings report is scheduled for April 25.

Total option volume is 17 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts by a bullish 23-to-1 ratio.
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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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