Options Trading News

June 27, 2013  Thu 9:27 AM CT

A large trade sees limited upside in Statoil.

More than 5,200 STO options have changed hands this morning, more than 10 times its daily average for the last month. Almost all of that volume was in one trade.

optionMONSTER systems show that a trader sold 5,000 October 22.50 calls for the bid price of $0.40. The previous open interest was only 681 contracts, so this is a new position.

The call selling is a bet that STO won't see much above that strike. A couple of minutes later, a block of 500,000 shares was bought for $20.95, so the result is a covered call position. The trade takes a maximum profit with STO at or above $22.50, but the strategy does give up any upside beyond that price. (See our Education section)

STO is up 1.5 percent to $20.83. it hit $20.02 last week, a new low. Shares of the Norwegian energy company have been trending lower since hitting $27 at the start of February.
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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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