OptionsHouse

Options Trading News

June 11, 2013  Tue 4:14 AM CT

DD: SEE CHART GET CHAIN FIND STRATEGIES
DuPont is challenging long-term resistance, and the bulls are positioning for a breakout.

optionMONSTER's Heat Seeker trade scanner detected the purchase of 15,000 October 57.50 calls for $1.42 and the sale of an equal number of October 50 puts for $1.12. The trade accounted for about 80 percent of total volume in the chemicals giant during the session.

Owning calls locks in the price where investors can buy a stock while selling puts lets them collect income from DD not falling. Combining the two strategies results in a position very similar to owning the equity, but at much lower cost and with much greater leverage.

Yesterday's trade cost just $0.30 to initiate and will earn profit of some 400 percent from the stock moving less than 10 percent by expiration. It also programs a buy for $50 on a drop below that price. He or she may be expected support around that price level because it was resistance in March and April. (See our Education section for more.)

DD rose 0.14 percent to $55.52 yesterday and is now back near the same level where it peaked in 2010. Its earnings have mostly beaten expectations in recent quarters.

Total option volume was 3.5 times greater than average in the session, according to the Heat Seeker.

Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »