Options Trading News

June 19, 2013  Wed 3:47 AM CT

One investor wants to get paid waiting for a rally in Canadian Natural Resources.

optionMONSTER's tracking programs detected the sale of 1,873 July 32 calls for $0.22 and the purchase of an equal number of June 32 calls for $0.05. Volume was below open interest in the June contracts, indicating that an existing short position was closed and rolled forward in time.

The investor probably owns shares in the Calgary energy company and has been selling calls to earn income. Adjusting the position allowed the trader to collect an additional $0.17 of premium but obligates him or her  to sell the stock for $32 if it closes above that level on expiration. (See our Education section for more on the strategy, known as a covered call.)

CNQ rose 0.61 percent to $29.65 yesterday and has been churning in a range for more than a year. The stock's technicals have been mostly bearish, with the shares mostly below their 200-day moving average since July 2011.

But they've been holding their ground since March, which could make some traders think that they're ready for a turnaround. In the meantime, the investor can collect the 1.6 percent dividend yield and earn income selling calls.

Total option volume was quadruple the daily average in the session.
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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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