Options Trading News

January 14, 2013  Mon 3:47 AM CT

Jazz Pharmaceuticals drew bearish option activity on Friday as its shares pulled back from a month-long rally.

optionMONSTER's Depth Charge system detected the purchase of 2,000 February 50 puts at the same time on Friday, with all but 5 contracts going for $0.85. The volume was nearly 7 times higher than the strike's open interest of just 297 contracts at the beginning of the day, clearly showing that this is a new position.

JAZZ fell 2.05 percent on Friday to close the week at $55.34, near a resistance level that goes back to mid-October. Shares have been running higher since bouncing off support at the $50 level a month ago.

Friday's puts, which lock in the price where shares can be sold, were not tied to any stock trades identified by our systems in the session. The options could be a hedge on a long position established earlier or making an outright bearish bet that the shares will fall some 13 percent by expiration in mid-February. (See our Education section)

The trade made up 97 percent of Jazz's total option volume on Friday, which was 10 times its daily average. Only 40 calls changed hands all day, a reflection of the session's bearish sentiment.
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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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