Options Trading News

January 8, 2014  Wed 12:20 PM CT

Dana Holding fell on a poor earnings report in late last year, but now the bulls are back.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 1,500 June 20 calls for $1.75. Equal amounts were sold at the same time in the June 18 puts for $1 and the June 22 calls for $0.85. Volume surpassed open interest at all three strikes, indicating that new positions were initiated.

The investor collected a credit for $0.10 and stands to earn $2 more if the auto-parts maker closes at $22 or higher on expiration. He or she is also on the hook to buy shares for $18 if they go below that level, but the stock peaked around that price in March, which could make the trader expect support and feel comfortable writing the puts. (See our Education section for more the strategy, which combines put selling with a vertical spread.)

DAN is up 1.37 percent to $19.88 in afternoon trading. It peaked at $23.46 in October but then gapped down to $19 after quarterly results missed expectations. Today's bullish three-way trade is looking for that bearish move to be retraced, possibly when the next numbers are released on Tuesday, Jan. 14.

Total option volume is 8 times greater than average in the name, according to the Heat Seeker.
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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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