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December 21, 2012  Fri 11:10 AM CT

DIA: SEE CHART GET CHAIN FIND STRATEGIES
The SPDR Dow Jones Industrial Average Fund doesn't usually see much option action, but today it is the target of a large call sale.

More than 52,000 DIA options have traded in total, compared to a daily average of around 35,000. optionMONSTER systems show that a trader sold 10,920 January 133 calls for the bid price of $1.52 against previous open interest of 7,550 contracts, so this is a new position.

The call selling isn't tied to any trading in the underlying shares that we can see today, but it is likley they they were traded against a previously established long position. That would create a covered call strategy, which would be bullish up to the $133 strike price but not beyond. (See our Education section)

The DIA is down 1.23 percent to $131.14 in early afternoon trading. The exchange-traded fund bounced off support at $125 a month ago and tested resistance around $134 earlier this week.
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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.

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