Options Trading News

October 24, 2012  Wed 2:45 AM CT

One investor apparently thinks there's no going back for Virgin Media as the stock hits new highs.

optionMONSTER's tracking programs detected the sale of 2,600 June 32 puts for $1.60 and $1.65 against no previous open interest. The transaction accounted for more than one-third of the volume in yesterday's session.

The investor is now obligated to buy shares in the British cable-television company if they fall below the $32 strike price in the next eight months. If they remain above it, he or she will keep the premium as the puts expire worthless.

The put selling is also bullish because it reflects a belief that downside is limited, but it's less directional than call buying. (See our Education section)

Last week some investors bought the March 37 calls looking for a breakout. Yesterday's rally boosted the value of those contracts by about 70 percent.

VMED rose 3.83 percent to $34.13 yesterday. It paused at its previous highs from last year but pushed through that resistance after reporting a surge in customer additions. Management attributed the news to a successful advertising campaign and said that fewer subscribers were abandoning service.

More than 7,300 option contracts traded in VMED yesterday, more than triple the daily average.
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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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