Options Trading News

May 23, 2013  Thu 4:14 AM CT

A large spread was betting on a floor in the Nasdaq 100 as the index fell yesterday.

optionMONSTER systems show that a trader sold 7,318 June 2875 puts for $11 and bought the same number of June 2865 puts for $10.10. The volumes were higher than the previous open interest in each strike, so this is new credit spread.

This spread takes in a credit of $0.90, which is the maximum profit if the NDX remains above 2875 through expiration in mid-June. The maximum potential loss is $9.10. (See our Education section)

The NDX lost 0.9 percent to close at 2999.13. The index traded as low as 2984.84 after hitting a 13-year intraday high above 3053. It was last below 2865 on the last day of April.

More than 52,000 NDX options changed hands, compared to a daily average of 14,535 over the last month.
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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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