Options Trading News

January 4, 2013  Fri 3:47 AM CT

Moody's hit a five-year high yesterday, but one trader is positioning for the stock to fall back to its 52-week lows in the next year.

optionMONSTER's Depth Charge system detected the purchase of 3,900 January 2014 35 puts in a single block for $1.60. The volume was clearly a new position, as the strike's open interest was only 37 contracts at the start of the session.

MCO was up fractionally yesterday at $51.87 after hitting climbing to $52.48 in midday trading, its highest level since August 2007. The credit-rating firm's stock has been rising steadily since hitting its 2012 low of $33.86 in late June.

Yesterday's put buying was not tied to any stock trades identified by our systems. Because these contracts are so far out of the money, they could well be a straight bearish bet that the stock will fall back below the $35 strike price. (See our Education section)

The trade made up the bulk of MCO's total option volume of 4,566 contracts, which was 22 times its daily average of just 209. Only 120 calls changed hands in the name all day, an indication of the session's bearish sentiment.
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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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