Options Trading News

August 30, 2012  Thu 2:15 AM CT


A. Schulman has been pausing after a nice run, and one investor thinks the top is in.

optionMONSTER's tracking systems detected the sale of approximately 5,000 September 25 calls for $0.25 and $0.30 against no previous open interest at the strike. The chemicals company normally sees volume of just 6 contracts, so that activity certainly stands out.

Writing calls obligates traders to sell shares at the strike price if they close above that level on expiration. They probably own shares and are using the options as part of a covered-call strategy, which mitigates risk while limiting upside. (See our Education Section.)

Wednesday's trade locked in an effective exit price of $25.25 to $25.30 -- roughly the same level where SHLM peaked in late April before crashing along with the rest of the market.

The stock then bottomed around $18 in mid-June, and proceeded to run higher for the next two months before halting around the current level. SHLM fell 0.08 percent to $24.51 yesterday.

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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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