OptionsHouse

Options Trading News

October 15, 2013  Tue 9:53 AM CT

WAG: SEE CHART GET CHAIN FIND STRATEGIES
A complex put spread tops today's option activity in Walgreen.

optionMONSTER systems show that a trader first sold 5,000 January 60 puts for $0.77 and then another block of 3,000 for $0.74 a few minutes later against previous open interest of 6,914. At the same times, he or she bought 5,000 April 52.50 puts for the ask prices of $2.42 and then $2.30 in volume that was 10 times the open interest at that strike.

This initially appeared to be a roll, but with the additional volume in the January contracts points to a diagonal spread. In that case, the trader is using the sale of the nearer-term further out-of-the-money puts to help offset the cost of purchasing the April options. It suggests that the trader sees a floor around $50 for the stock through the end of the year. (See our Education section)

WAG is down fractionally to $56.64 reversing earlier gains this morning. The drugstore chain was trading at the $50 level a month ago.

About 20,000 WAG options have traded this morning, almost double its daily average already.
Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »