Options Trading News

February 26, 2013  Tue 2:14 AM CT

Honeywell has pulled back from all-time highs reached last week, but one trader doesn't see that decline leading to a huge selloff in the next few months.

optionMONSTER's tracking systems detected the sale of 1,782 April 55 puts in 11 seconds yesterday, led by a print of 1,500 that went for $0.13. The volume was about 12 times higher than the strike's open interest of just 150 contracts before the day's trading began, clearly showing that this is a new position.

This put seller is looking for HON to stay above $55 through expiration in mid-April. If the stock falls below that strike price, the trader will face the obligation to buy the stock at that level. (See our Education section)

HON, which will hold its annual investor conference on March 6, fell 1.34 percent to $68.95 yesterday. The industrial and aerospace conglomerate hit a lifetime high of $71.43 last Wednesday before dropping with the rest of the market.

Total option volume in HON was 8,220 contracts yesterday, 60 percent higher than its daily average of 5,131 for 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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