Options Trading News

August 3, 2012  Fri 3:16 AM CT

As United Rentals struggles to bounce off its lows of the year, one trader is betting on a floor beneath the stock.

optionMONSTER's systems detected the sale of 2,800 January 18 puts for $1.15 in late-afternoon trading. Open interest in the strike was just 119 contracts at the beginning of the day, so this is a new position.

The put seller represents a belief that URI will be above the $18 strike price at expiration, a level not seen since October of last year. If the stock is below that price at that time, the trader faces the possibility of having to buy the stock, but at an effective price of $16.85. (See our Education section)

URI rose 1.04 percent yesterday to close at $28.07, down more than 40 percent from its 52-week high near $48 in late April. The equipment-rental company gapped down from above $34 on July 18 after reporting second-quarter earnings, and stock reached its 2012 lows under $27 late last week.
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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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