Options Trading News

March 22, 2013  Fri 3:47 AM CT

One investor apparently thinks that Catamaran will sail higher.

optionMONSTER's Heat Seeker market scanner detected an unusual bullish three-way trade in the pharmacy-benefits company, already up more than 1,600 percent in the last 4-1/2 years.

The strategy involved buying the July 52.50 calls for $4.20, while the July 47.50 puts were sold for $2.50 and the July 60 calls were sold for $1.60. An even 2,510 contracts traded in each, pushing total options volume to more than 6 times open interest at all three strikes.

It cost just $0.10 to open the position, which will earn a profit of 7,400 percent if the stock closes at or above $60 on expiration. It also faces potential losses to the downside because of the short puts. (See our Education section for more on the benefits and risk of selling protection.)

CTRX fell 0.71 percent to $51.85 yesterday and has been trending steadily higher since the market bottomed in late 2008 amid consistently strong earnings reports.

Total option volume was 6 times greater than average in yesterday's session, according to the Heat Seeker.
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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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