Options Trading News

October 10, 2012  Wed 3:16 AM CT

Medtronic fell yesterday when one of its competitors lowered revenue estimates, but one trader apparently viewed the drop as a buying opportunity.

optionMONSTER's Heat Seeker tracking system detected the purchase of 2,031 May 49 calls for $0.90 at the same second yesterday morning. That volume dwarfed the open interest of just 9 contracts in the strike at the start of the session, so this is clearly a new position.

MDT fell 2.17 percent yesterday to close at $43.25 after rival Edwards Lifesciences pre-announced its third-quarter estimates, saying that revenues have been hit by weakness in Europe. Shares of the heart-device maker have been gaining steadily since breaking out of a multi-month range in late July.

If yesterday's long calls are held until expiration next May, MDT would need to gain at least 16 percent for the trade to turn a profit. But if the premiums on those options rise with any rally before then, the trader could sell the calls for a profit earlier. (See our Education section)
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Invest Like a Monster - San Antonio: October 9-10

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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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