OptionsHouse

Options Trading News

May 25, 2012  Fri 2:17 AM CT

ATHN: SEE CHART GET CHAIN FIND STRATEGIES
Someone is trying to turn time into money with Athenahealth.

optionMONSTER's tracking systems detected the purchase of 2,000 June 75 calls for $5.30 and the sale of an equal number of July 80 calls $4.80. Volume was below open interest in June but not July, indicating that at an existing short position was rolled from one contract to the other.

The investor is probably using the options to manage a long position in the company, which provides back-office services to doctors. Selling calls allows him or her to earn income from the passage of time, which lowers the position's overall cost basis and reduces volatility.

It also locks in the price where they must unload their shares, so yesterday's transaction effectively raised that level from $75 to $80. In return for that additional $5 of upside on the shares, the trader paid $0.50. (See our Education section for more on how options can be used to manage risk.)

ATHN rose 1.1 percent to $77.84 yesterday after hitting an all-time high of $79.41 earlier in the session. The stock is up more than 50 percent so far this year, fueled by strong earnings growth and short covering.

Overall option volume was 9 times greater than average yesterday.
Share this article with your friends


OptionsHouse

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Education & Strategy

Using spreads to minimize risk

Last week we discussed the risk vs reward profile of a debit call spread in Wells Fargo (WFC). This week we will run thru the risk vs reward of selling a credit put spread to achieve the same exposure of that debit call spread.

View more education articles »