Options Trading News

November 28, 2012  Wed 9:56 AM CT

Lorillard has been trying to bounce, and one investor is looking for the gains to continue.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,500 June 125 calls for $5.40 and the sale of an equal number of January 125 calls for $1.60. Volume was below open interest in the Januarys but not the Junes, indicating that an existing position was rolled from one contract to the other.

The investor collected a credit of $3.80 and now has an additional five months to benefit from upside in the tobacco stock. Adjusting the position makes them less likely to lose money to time decay over the next 1-1/2 months and keeps them in the game for a springtime rally. (See our Education section for more on how the calendar affects option premiums.)

LO is up 0.32 percent to $120.43. It peaked around $140 in July, pulled back to long-term support around $110, and has been bouncing since then, resulting in a gain of about 7 percent since mid-November. The company gets almost 90 percent of its sales from Newport menthol cigarettes.

Total option volume is 6 times greater than average so far today, according to Heat Seeker. Calls outnumber puts by 30 to 1.
Share this article with your friends

Invest Like a Monster - San Antonio: October 9-10


The fastest money in the market
View full report »

Premium Services

Archived Webinar

Education & Strategy

Options Academy: More on the Covered Call Strategy

Last week, we talked about the Covered Call and the misconceptions that surround it. We spoke about how an investor must realize that the Covered Call is actually a premium collection strategy and not so much a directional one. If an investor can grasp this idea, the investor stands to do a heck of a lot better in the strategy than they currently do.

View more education articles »