Options Trading News

December 26, 2012  Wed 4:15 AM CT

Traders were charging into Facebook with short-term bets on Monday after investment-banking firm Needham raised its price target for the social-networking stock.

optionMONSTER's Heat Seeker system showed bullish activity in several strikes that expire at the end of this week. Calls traded in a strong buying pattern at the December 25.50, 26.50, 27, 27.50, and 28.50 strikes, all well above their respective open interests and therefore new positioning.  

Long calls lock in the price where a stock can be bought and can provide significant leverage if the shares rally. Monday's trades are looking for Facebook to hold current levels or rise modestly, depending on the strike and the price of the options purchased. (See our Education section)

FB gained 2.55 percent on Monday to close at $26.93 after Needham raised its price target to $33 from $25 that morning, citing estimates for mobile-revenue growth. Shares had climbed sharply since hitting support around $19 in mid-November but have failed to break resistance at the $28 level.

Total option volume in the name exceeded 88,000 contracts, well above its full-session average despite the truncated holiday session.

(A version of this post appeared on InsideOptions Pro on Monday.)
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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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