Options Trading News

July 5, 2013  Fri 11:52 AM CT

A trader apparently believes that any upside will be limited in Neptune Technologies & Bioresources for the next several months.

optionMONSTER systems show that about 10,000 NEPT options have traded, already 4 times its full-session average for the last month. Dominating the volume is one print in the November 5 calls, where a trader sold 9,700 of those calls for the bid price of $0.10 on a wide bid/ask spread. The previous open interest was just 147 before the trade appeared, so this is a new position.

This trade carries the obligation to sell 970,000 shares of NEPT if it rises above $5, while today's today stock volume is just 86,000 shares. The calls could have been sold naked or against an existing long position in a covered-call strategy. Either way, the trader is making the bet that $5 is the likely high by that November expiration. (See our Education section)

NEPT is up 1.7 percent to $3.295 this afternoon. The pharmaceutical company was up $3.40 at the start of the week, its highest level since gapping down in early November. Shares dipped as low as $1.62 at that point but have been climbing since.
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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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