Options Trading News

November 11, 2013  Mon 3:47 AM CT

Revolution Lighting Technologies soared after reporting strong quarterly numbers on Friday, and option traders are looking for more gains in the LED company.

About 2,000 June 5 calls were bought for $0.65 on Friday in volume that dwarfed the previous open interest of just 12 contracts, according to optionMONSTER's Heat Seeker tracking system. Another 1,200 June 2.50 calls were bought for $1.25 to $1.40 with zero open interest at that strike.

These long calls lock in the price where traders can buy the stock no matter how far it might rise. The contracts are looking for RVLT to continue rallying through mid-June 2014 but will lose value if shares are not higher as that expiration approaches. (See our Education section)

RVLT spiked up 21.48 percent on Friday to close at $3.28, climbing back above its 200- and 50-day moving averages. The stock was last above $5 in July but has not closed above that price since April 2010.

Total option volume in RVLT topped 5,300 contracts on Friday, more than 16 times its daily average for the last month. Overall calls eclipsed puts by nearly 4 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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