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


Related Stories

DD

What's behind DuPont put buying

March 30, 2015

The chemical company gapped down twice in mid-March after a downgrade from Bank of America and the rejection of two board nominees by activist investor Trian Fund Management.

OptionsHouse

Premium Services

Education & Strategy

Investor deficiency in premium collection

Most investors have heard about selling options as a form of income generation. You hear it from brokers and financial advisors as a way to generate income without selling off pieces of your nest egg, dwindling through your retirement accounts, and then being stuck figuring out how to financially afford the rest of your life...

View more education articles »