OptionsHouse

Options Trading News

November 1, 2013  Fri 12:20 PM CT

QCOM: SEE CHART GET CHAIN FIND STRATEGIES
Traders are playing for a breakout in Qualcomm, which reports earnings next week.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 11,000 December 72.50 calls for $0.92 and the sale of an equal number of December 65 puts for $0.73. Volume surpassed open interest at both strikes, indicating that new positions were initiated in the semiconductor company.

Buying calls locks in the price where a stock can be purchased, while selling puts lets the investor collect money if shares hold above designated levels. Combining the two is highly bullish, letting the trader play for a rally at minimal cost but carry risk if the stock falls too far. (See our Education section)

Today's strategy cost just $0.19 per contract, or $209,000. That amount initially controls about 528,000 shares, with leverage increasing to the upside or downside. The position will dwindle in value if no move occurs.

Using the combination trade prevents the investor from missing a rally, while also programming a buy order at $65 if it drops. (See our Education section for more on how to manage trades more effectively with options.)

QCOM is up 0.29 percent to $69.69 in afternoon trading, continuing to consolidate at its highest level since the 2000 tech bubble. The company's next quarterly results come out next Wednesday, Nov. 6, after the closing bell. The last report beat expectations and management raised guidance.

More than 57,000 contracts have changed hands in the name so far today, almost triple its average daily amount for the last month. Overall calls are outpacing puts by nearly 2.5 to 1.
Share this article with your friends


Related Stories

QCOM

Is Qualcomm poised for big rally?

August 26, 2015

The chip maker has struggled with weak results for several quarters but recently cut costs and bought back stock in accordance with the wishes of activist investors.

OptionsHouse

Premium Services

Archived Webinar

Education & Strategy

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.

View more education articles »