Options Trading News

April 3, 2014  Thu 4:45 AM CT

Tech stocks are at long-term highs, and the bulls are looking for more.

optionMONSTER's Heat Seeker monitoring program detected the purchase of some 37,000 June 39 calls in the SPDR Technology exchange-traded fund for $0.14 and $0.15. Volume dwarfed premium open interest of 256 contracts, which indicates that new positions were initiated.

These long calls lock in the price where a stock can be purchased. That way, investors won't miss a rally but also risk much less capital than would be used in buying shares directly. Traders also stand to earn significant leverage from even a small gain in the stock. (See our Education section)

The XLK was up fractionally yesterday to close at $36.80 after peaking at $36.91 in the morning. It hasn't traded that high since February 2001, when the sector was in the midst of collapsing from the late-1990s tech bubble.

Yesterday's upside activity comes before the start of first-quarter earnings season. The first big announcement in the sector is Micron Technology this afternoon, followed by Yahoo and Intel in mid-April.

Total option volume in the XLK was 8 times greater than average in the session, according to the Heat Seeker. Overall calls outnumbered puts by more than 50 to 1.
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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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