Options Trading News

November 11, 2013  Mon 3:16 AM CT

A large trader is looking for NCR to rebound after pulling back last month.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 January 39 calls for $1.20 and the sale of an equal number of January 33 puts for $0.90. Volume was more than 10 times open interest at both strikes, indicating that new bets were placed.

Owning calls
locks in the price where a stock can be purchased, while selling puts generates income but creates an obligation to buy in the event of a pullback. Combining the two strategies produces a highly leveraged long position. (See our Education section)

The trader paid just $0.30 and stands to earn huge profits if the maker of bank-teller machines and cash registers pushes above $39.30 on expiration. He or she also faces losses on a drop below $33. If the stock remains between those two levels through mid-January, the position will expire worthless.

NCR rose 2.87 percent to $36.54 on Friday. It's up 43 percent so far this year but is down 8 percent in the last month after quarterly revenue missed expectations on Oct. 24.

The shares are now attempting to stabilize near their 100-day moving average. They also peaked around $33 in June, which could make some chart watchers comfortable writing puts at that level.

Total option volume was 6 times greater than average in the session, according to the Heat Seeker.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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