Options Trading News

September 21, 2012  Fri 9:16 AM CT

Delphi Automotive hit an all-time high this morning before pulling back with a large call sale.

DLPH is now down 0.34 percent to $31.91. The auto-parts manufacturer peaked at $33.34 off the open but fell quickly from there.

A trader sold 10,000 February 35 calls for the bid price of $1.10 in volume that far outstripped the name's total daily average of just 1,600 contracts, according to optionMONSTER's systems. Open interest in this strike was 7,318 at the start of the session, so this is a new position.

The call selling is a bet that DLPH will be below $35 by that February expiration. The options may have been traded against long stock as a covered call position, which would be bullish up to the strike price but not beyond. (See our Education section)
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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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