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January 8, 2013  Tue 11:00 AM CT

NCT: SEE CHART GET CHAIN FIND STRATEGIES

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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Options Academy: Ron's Risk Calculation--A Real Life Example

It is rare that I get a chance to give a real-life, real-time example in my articles that the readers were not only following but were actually involved in at the time the event is happening. Well, that is where we are right now in our QQQ trade from last week. Let's recap the trade itself.

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