Options Trading News

January 4, 2013  Fri 2:14 AM CT

Danaher climbed to new highs yesterday, but one trader apparently believes that further gains will be limited in coming months.

A trader bought 3,128 January 57.50 calls for $1.08 against previous open interest of 5,689, according to optionMONSTER systems. At the same time, he or she sold 3,819 June 62.50 calls for 1.23 and $1.22 in volume far above the open interest of 348 at that strike.

This appears to be a trader buying back the January short calls, which are now in the money and expire in two weeks, and rolling the position to the higher strike in later-dated contracts. The options were very likely sold against long shares in a covered call strategy, which allows the investor to generate income by selling calls while holding a long stock position. The new short calls will allow the trader to profit up to the $62.50 strike price but not beyond. (See our Education section)

DHR is in business of professional, medical, industrial, and commercial products and services. The stock rose 0.96 percent to $58.03 yesterday after hitting a new all-time high of $58.34 earlier in the session. It has been running higher for the last six weeks from support around $52.

Total option volume in the name was 11,456 contracts, compared to a daily average of just 580. More than 5,400 of the January 57.50 calls and 4,400 of the June 62.50 calls traded overall.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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