Options Trading News

April 17, 2013  Wed 4:14 AM CT

SolarWinds has been lagging, and one investor is bracing for continued weakness.

optionMONSTER's Depth Charge tracking program detected the sale of 1,300 June 45 puts for $1.30 and the purchase of an equal number of September 45 puts for $2.80. Volume was below open interest in the June contracts, indicating that an existing position was closed and rolled forward in time.

The transaction cost $1.50 and will provide an additional three months of downside exposure to the software company. In addition, adjusting the trade now protected the investor from the quickening pace of time decay in the shorter-term options as expiration approaches on June 21. (See our Education section)

SWI rose 1.05 percent to $51.12 yesterday. While the stock roughly tripled between September 2011 and September 2012, it's lagged the broader market since and is down 2 percent so far this year as earnings beat expectations by narrower margins. The next quarterly report is scheduled for after the closing bell on April 30.

Total option volume was 7 times greater than average in the session, according to the Depth Charge. Puts accounted for almost four-fifths of the activity.

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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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