Options Trading News

September 19, 2013  Thu 12:20 PM CT

Construction stocks are starting to perform, and one investor apparently wants to give Fluor room to run.

optionMONSTER's tracking programs detected the purchase of about 1,800 September 70 calls for $1.30 and the sale of a similar number of October 75 calls for $0.45 at the same time. Volume was below open interest at the lower strike, which suggests an existing short position was closed and rolled to the higher strike.

The investor probably owns shares in the company, whose customers are in the energy, infrastructure, and mining industries, plus the public sector. He or she probably sold the 70s at an earlier date to earn income and now wants to adjust the position higher. This way they can collect an additional $5 on the stock. Making the swap cost $0.85.

Otherwise, the investor would be forced to unload the stock tomorrow for $70. Known as a covered call, the strategy is used to reduce volatility in a long position. (See our Education section)

FLR is up 1.8 percent to $71.17 yesterday and has risen 20 percent since the beginning of July. The engineering and construction company is climbing as sentiment improves toward the global economy--especially in the energy space--and after its last two earnings reports beat expectations. Other names such as Foster Wheeler and Chicago Bridge & Iron have also been strong, according to our researchLAB market scanner.

Total option volume is 14.5 times greater than average in the name so far today.
Share this article with your friends


Premium Services

Archived Webinar

Education & Strategy

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.

View more education articles »