Options Trading News

January 14, 2013  Mon 11:19 AM CT

A large call sale makes up almost all the option volume in Dollar General today.

optionMONSTER systems show that 25,292 DG options have traded so far today, eclipsing its daily average of 1,700 in the last month. One print makes up almost all of that volume.

A trader has sold 25,000 August 50 calls for the bid price of $0.95. Open interest at that strike was just 5 contracts at the beginning of the day, so this is a new position.

The call selling was not tied to any trading in the underlying shares identified by our systems today. This could have been naked selling with an initial bearish bias that would profit with DG anywhere below $50.95 at expiration. The calls could also have been traded against an existing long position in the shares, which would be bullish up to $50 but not beyond. (See our Education section)

DG is trading at $43.11 this afternoon, down 0.5 percent on the day. The discount retailer a 52-week low of $39.73 on Jan. 3 but quickly recovered back above support at $42. Shares were above $50 at the start of December.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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