Options Trading News

September 6, 2013  Fri 11:43 AM CT

One investor apparently sees limited upside in health-benefits company WellPoint.

More than 12,000 WLP options have traded, triple its daily average for the last month. Almost all of that has been in the November 90 calls, which saw a block of 8,367 sold for the bid price of $2.40, according to optionMONSTER systems. The volume dwarfed the strike's previous open interest of 284 contracts, clearly showing that this is new positioning.

The call seller is betting that WLP will not see much upside beyond $90 through expiration in mid-November. These options were likely sold against long shares in a covered-call strategy, which is bullish up to that level but not beyond. Traders typically use covered calls to increase yield while holding onto shares. (See our Education section)

WLP is up fractionally to $87.52 this afternoon. The shares have been in a relatively tight range for the last two months between $84 and $88.
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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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