Options Trading News

September 19, 2013  Thu 4:14 AM CT

A bullish trader is repositioning for more gains in Pepsico by next spring.

optionMONSTER's Heat Seeker system detected the sale of 2,500 January 80 calls for $3.50 and the purchase of about 3,000 April 85 calls for $2.12 to $2.14 yesterday. Volume was below open interest in the January options but above it in the April contracts, indicating that a long-call position was being rolled forward to a higher strike.

The adjustment keeps the investor in the trade for an additional three months and is especially bullish because the position is being raised by $5. The new calls lock in the price where the stock can be purchased through mid-April no matter how far it might climb, but they will expire worthless if shares remain below $85. (See our Education section)

PEP rose 1.49 percent to $82.88 yesterday, climbing back above its 50-day moving average. The food and beverage giant fell sharply from above $85 in the first half of August but has been rising in recent days after holding support at the $79 level.

Total option volume in the named topped 12,400 contracts yesterday, 2.5 times its daily average for the last month. Overall calls outnumbered puts by more than 6 to 1. 
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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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