Options Trading News

September 20, 2012  Thu 9:27 AM CT

JP Morgan has been rebounding, but one trader sees little further upside.

A block of 1,800 October 44 calls were sold for $0.19, and about 40 minutes later a block of 9,000 was sold for the same price, according to optionMONSTER's systems. Open interest in the strike was 3,001 at the start of the day, so this is a new position.

JPM is down 1.5 percent to trade at $40.72. Shares were below $31 at the start of June but have rallied since. The bank traded above $42 last Friday, its highest level since the start of May.

Today's call selling is a bet that JPM won't be much above that price over the coming weeks. If they were sold naked the trade has an initial bearish bias, but it can profit with the stock anywhere below $44.19. If the options were sold against long shares as a covered call, then the trade is 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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