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November 19, 2013  Tue 2:45 AM CT

HST: SEE CHART GET CHAIN FIND STRATEGIES
Call selling is looking for limited volatility in Host Hotels and Resorts.

More than 14,700 HST options changed hands yesterday, compared to the daily average of 801. Virtually all of that volume was in the December 19 calls, where a single print of 14,427 was sold for the bid price of $0.40. The previous open interest at that strike was 123 contracts, so this is clealry a new position.

Less than a minute later, a single block of 720,700 shares of HST was bought for $18.99. Taken together, the stock and option trades create delta-neutral position that is betting on lower volatility that that implied by the options. (See our Education section)

HST lost 0.84 percent to close at $18.85 yesterday, in the middle of its recent range. The stock hit a 52-week high of $19.26 two weeks ago.
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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.

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