OptionsHouse

Options Trading News

December 7, 2012  Fri 12:20 PM CT

HSP: SEE CHART GET CHAIN FIND STRATEGIES
One investor has cleaned up in Hospira and apparently believes that the stock may keep rallying.

On Nov. 26, optionMONSTER's Heat Seeker market scanner detected heavy buying in the December 30 calls as traders looked for the pharmaceutical stock to bounce. It turned out to be a good call because HSP started higher two days later and hasn't looked back since.

While the shares are up less than 10 percent since that activity, the December contracts have more than tripled in value. So today, the investor sold 2,752 of the December 30s for an average premium of $1.375. He or she then purchased 2,800 January 35 calls for $0.20.

The net result is that they recovered $322,400, more than twice their initial investment. But because they rolled up to the January 35s, they stand to keep making money if the stock extends its gains into the New Year. (See our Education section) for more on how options can help you manage positions more effectively.)

HSP is up 0.56 percent to $31.47 in afternoon trading. The stock had been sliding since the summer despite three strong quarterly reports in a row.

Total option volume is almost 6 times greater than average in the name so far today, with calls outnumbering puts by 22 to 1.
Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »