Options Trading News

February 11, 2013  Mon 10:12 AM CT

AOL gapped higher last week, and the bulls are looking for more.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 10,000 April 36 calls for $2.15 and the sale of 10,000 April 31 puts for $0.35. Volume was more than 40 times open interest at both strikes.

The position cost $1.80 to open and is similar to owning shares in the online media site. Interestingly, they bought calls that are much closer to being in the money than the puts they sold. That increased the cost of the trade and made it more conservative, suggesting that he or she may think that a pullback is possible. (See our Education section)

They also chose the $31 level to write puts, the top of AOL's price range before last week's rally. Some chart watchers may consider that a likely level to expect support if the shares decline. (See our Education section)

The shares are up 6.35 percent to $35.87 in morning trading. One of the first major Internet companies in the 1990s, AOL struggled to stay relevant for years before advertising growth started to drive results in 2012.

Total option volume in the name is 12 times greater than average so far today, 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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