Options Trading News

February 25, 2013  Mon 11:53 AM CT

CenturyLink has tried to bounce after a nasty drop, but the momentum bears are coming back.

optionMONSTER's Depth Charge tracking program detected the purchase of 7,835 July 35 puts for $2.45 and the sale of an equal number of July 35 calls for $1.15. Volume surpassed open interest at each strike, indicating that new positions were initiated.

The trade cost $1.30 and is similar to short selling the Louisiana telecom for $28.70. If CTL drops, the puts owned will appreciate in value, while the calls sold short will dwindle. The opposite will happen to the upside. (See our Education section for more.)

CTL is down 0.4 percent to $34.50 in afternoon trading and has lost 14 percent of its value in the last month. Most of that drop occurred on Feb. 14 after quarterly results lagged estimates and management lowered the company's dividend.

The stock has tried to rebound since then but has remained trapped below $35. That could be leading some traders to believe that this level is now resistance.

Today's bearish trade dominates the options activity in the name today, accounting for more than 80 percent of today's volume.
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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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