Options Trading News

April 16, 2013  Tue 3:16 AM CT

McKesson fell with the rest of the market yesterday, but one investor sees little risk of a major drop.

optionMONSTER's tracking programs detected the sale of 7,500 August 100 puts for $2.80. Volume was almost 7 times previous open interest at the strike.

The trader is now obligated to buy shares in the pharmacy-benefits company for $100 if they're below that level on expiration this summer. Including the credit earned, the cost basis would be $97.20. If it remains above $100, the puts will expire worthless, and he or she will keep the $2.80. (See our Education section for more on short puts.)

MCK fell 1.02 percent to $107.25 yesterday but is up 18 percent in the last six months. It's been trending steadily higher for years and hit an all-time high above $110 last month.

Total option volume was 10 times greater than average in the session.

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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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