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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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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