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August 13, 2013  Tue 9:03 AM CT

MPEL: SEE CHART GET CHAIN FIND STRATEGIES
Call selling dominates today's option trade in Melco Crown Entertainment with shares near highs.

optionMONSTER systems show that a trader sold 3,800 January 33 calls for $0.55. The previous open interest had been just 173 contracts, so this is a new position.

These calls could have been sold naked with an initial bearish bias, especially given how far out of the money and time it is. Alternatively they could also have been sold against long shares in a covered-call position, which would be bullish but only up to $33. (See our Education section)

MPEL is up fractionally this morning to $26.37. The casino operator has been trending higher from below $22 in the last month. It has been trading in a very tight range in the last week or so and posted a closing high of $26.40.
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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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