OptionsHouse

Options Trading News

January 29, 2013  Tue 5:16 AM CT

HRB: SEE CHART GET CHAIN FIND STRATEGIES
One investor is looking for more gains from H&R Block, which has been rampaging higher for months.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 21,220 April 25 calls for $0.15 and the sale of an equal number of April 20 puts at the same time. There was barely any open interest at either strike when the trade occurred, indicating that this is new combination trade. It cost essentially nothing to implement.

If the tax-preparation company appreciates, the long calls stand to gain in value while the short puts will dwindle. The opposite will happen to the downside, so the position is directionally similar to owning shares.

The main difference is that it will become worthless if HRB closes between $20 and $25 on expiration. It appears the investor wants cheap exposure to a runaway rally with modest risk of loss, tailor made to coordinate with income-tax reporting season in April. (See our Education section)

HRB rose 1.12 percent to $22.58 yesterday and is up 39 percent in the last six months. Yesterday combination trade pushed total option volume to 23 times greater than average in the session, according to the Heat Seeker.
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 »