Options Trading News

January 8, 2013  Tue 11:00 AM CT


Newcastle Investment has rallied to a multi-year high, but traders apparently think that it's going to take a break.

Option volume in the real-estate finance company tops 27,000 contracts, compared to a daily average of 930 over the last month. Most of the action is in an August combination.

optionMONSTER systems show that 10,879 contracts traded in each in the 10 calls and puts. The calls went for $0.82 and the puts for $1.33 against previous open interest of 593 and 594 respectively. Both sides of the transaction trade appear to be part of a short-straddle position. (See our Education section)

The trader took in a credit of $2.15, which is their maximum profit if NCT closes at $10 on expiration. Gains will erode on either side of that level, down to $7.85 or above $12.15 at expiration.

NCT is up 2.5 percent to $9.84 in midday trading, its highest since June 2008. The gains add to those of previous days as shares were down at $9 last week and have more than doubled over the last year.

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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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