Options Trading News

March 13, 2013  Wed 12:20 PM CT

The bulls apparently think that there's no stopping Symantec, which is near its highest level in more than eight years.

optionMONSTER's Heat Seeker tracking program detected the purchase of 4,200 April 25 calls for $0.44 and the sale of an equal number of April 24 puts for $0.51. That translates into a credit of $0.07.

The investor now has double-long exposure to the provider of computer-security products. If SYMC rallies, the long calls will appreciate and the puts sold short will dwindle in value. The opposite will happen to the downside.

While similar to owning shares, the position differs because it will track movements in the stock price less closely as time passes, becoming worthless if the stock remains between $24 and $25 on expiration 5-1/2 weeks from now.

The benefit of the strategy is that the investor won't miss a runaway rally, while the short puts effectively program a buy order on a drop below $24. That can be easier than trying to pick precise entry and exit levels on the stock. (See our Education section for more on how options can be used to manage trades.)

SYMC is off fractionally at $24.41 in afternoon trading. It's up 29 percent since the start of the year as concerns have risen over digital security, and its quarterly results have beaten expectations for at least four straight quarters. Option traders have already earned triple-digit gains in the name earlier this month and in January.

Today's bullish trade pushed total option volume to almost twice the daily average, according to the Heat Seeker.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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