Options Trading News

April 3, 2013  Wed 9:32 AM CT

Call selling tops today's option activity in Fossil, which has given up this year's gains.

More than 6,000 May 90 calls traded against the strike's previous open interest of just 23 contracts, clearly indicating new activity, according to optionMONSTER tracking systems. The volume was led by a block of 4,505 calls sold for $6.60 on a wide bid/ask spread.

The options were not sold against any FOSL stock activity identified by our systems today but, because they are in the money, they were almost certainly traded against an existing long position in a covered call strategy. Some traders using covered calls as a way to sell stock while collecting the option premium in the process. (See our Education section)

FOSL is down 2.33 percent to $91.31 this morning. The fashion-watch maker was above $110 in mid-February but is now at its lowest level since the end of 2012.  

optionMONSTER systems show that 6,800 FOSL options have traded, fewer than 400 of which are puts. That compares to a daily average volume of 1,250 contracts in the last month.
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The covered call and unhedged risk

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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