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December 18, 2012  Tue 4:14 AM CT

VALE: SEE CHART GET CHAIN FIND STRATEGIES
Vale is on the rise again with heavy call volume, but the option activity may not be especially bullish on the Brazilian metals and mining company.

optionMONSTER's systems detected the purchase of 5,000 March 19 calls for the ask price of $1.74 in volume that was below open interest of more than 13,000 contracts. At the same time, the trader sold 5,000 June 20 calls for the respective bid price of $1.53 with volume above open interest and therefore new activity.

The trade could be a short diagonal spread, which entails buying and selling options at different expiration months to take advantage of higher premiums. But given the data and the price action, this appears to be a trader rolling forward a covered call position, buying back the earlier short calls and selling contracts at the higher, later-dated strike as the stock rises. (See our Education section)

VALE gained 1.52 percent yesterday to end the session at $20 even, its highest close since early July. Shares were down at support at $17 just at the beginning of this month.
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Options Academy: Ron's Risk Calculation--A Real Life Example

It is rare that I get a chance to give a real-life, real-time example in my articles that the readers were not only following but were actually involved in at the time the event is happening. Well, that is where we are right now in our QQQ trade from last week. Let's recap the trade itself.

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