Options Trading News

February 7, 2013  Thu 5:14 AM CT

The bulls are betting that Boeing gets cleared for takeoff.

optionMONSTER's Heat Seeker program detected the purchase of about 10,500 January 90 calls for $1.71 and the sale of an equal number of January 100 calls for $0.52. Volume exceeded the previous open interest at each strike, indicating that these are new positions.

Owning calls locks in the price where a stock can be bought, while selling them obligates a sale at a certain level. In the case of yesterday's bullish call spread, the trader has the right to buy BA for $90 and then sell it for $100 if the stock climbs to the higher price. It cost $1.19 to open that $10 spread. (See our Education section)

BA rose 0.53 percent to $76.29 yesterday. Shares of the aerospace giant have been moribund for months, but the chart has been quietly lining up for a potential rally. While worries remain about problems with its Dreamliner jet, the company has bullish tailwinds from secular growth in global air travel and outperformance in the transport sector.

Based on yesterday's closing price, BA needs to appreciate 31 percent to reach $100. If it hits that level by January expiration 11 months from now, the spread will expand and the trader will stand to earn a profit of 740 percent based on the cost--illustrating the kind of leverage that options can provide.

Calls outnumbered puts by almost 3 to 1 yesterday, a reflection of the session's bullish sentiment.

(A version of this post appeared on InsideOptions Pro yesterday.)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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