Options Trading News

September 26, 2013  Thu 2:45 AM CT

One trader is looking for lower volatility in Safeway with shares near five-year highs  

optionMONSTER systems detected the sale of 5,000 January 32 puts for the bid price of $1.35. This is clearly a new position, as open interest in the strike was just 704 contracts before the trade appeared.

Less than two minutes later, 160,000 SWY shares traded for $32.0625. Combined with the short puts, this creates an overall delta-neutral position that is designed to profit from volatility that comes in lower than what is implied by the options. (See our Education section)

SWY was down 0.5 percent to $31.92 yesterday, one session after seeing its highest close since June 2008. Shares of the supermarket chain have doubled in the last year.
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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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