Options Trading News

December 13, 2012  Thu 2:14 AM CT

Someone thinks that 13 is an unlucky number for Fifth & Pacific.

That's the level where one investor chose to sell about 5,000 January calls yesterday, according to optionMONSTER's tracking programs. They priced for $0.55 and $0.50, and volume was more than twice previous open interest at the strike.

The trader is now obligated to sell shares in the apparel company for $13 if they close above that level on expiration in mid-January. He or she probably owns stock and wrote the contracts to help manage risk in a covered call strategy. (See our Education section)

FNP rose 1.28 percent to $12.70 yesterday and is now back near the same level where it gapped lower after cutting its guidance in early October. That could be leading some traders to believe that it will face resistance, helping explain the call sale.

The investor is essentially betting that the stock will remain below about $13.50 through expiration, which would be the effective price if it closes above $13. (The $13 strike price plus the $0.50 credit earned from selling the calls.)

FNP, which changed its name from Liz Claiborne in May, has been repositioning itself around its Juicy Couture, Lucky Brand, and Kate Spade lines.

The call selling pushed total option volume to 14 times greater than average in yesterday's session.
Share this article with your friends

Invest Like a Monster - San Antonio: October 9-10

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 »