Options Trading News

October 11, 2012  Thu 2:14 AM CT

One investor sees no going back for Liberty Global, even as shares extend a four-year rally.

optionMONSTER's tracking programs detected the sale of 2,000 November 60 puts for $1.45 against open interest of 1,267 contracts. The trade accounted for almost all the option activity in the cable-television company, which generates more than 90 percent of its revenue in Europe.

The investor is now obligated to buy shares if they close below the strike price on expiration, but including the credit earned their entry price would be $58.55. Above $60, the contracts will expire worthless and they'll keep the $1.45 credit.

LBTYA rose 0.02 percent to $60.28 yesterday. The stock is up 47 percent so far this year and has appreciated more than 500 percent since the broader market bottomed out in March 2009.

Selling puts
is a common strategy when traders like a stock but don't want to spend capital to get long. It allows them to set an entry price below current levels and get an opportunity to make some money even if the pullback doesn't occur. The main risk is that shares fall more than expected. (See our Education section)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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