Stocks vs. Options: Which generates better returns?
Plug in your stock idea to find options trades offering a potentially better ROI.
NEW TO OPTIONS?
Visit our New to Options page to learn more.
Find out more »
Call Buying in Dell (DELL) and a Check on Research in Motion (RIMM) on Earnings Eve
Beth Gaston Moon is the Senior Editor for the Options News Network. Beth was a member of the research department at Schaeffer's Investment Research for more than a decade. ONN’s Most-Active Options Update is our daily listing of the “Lucky 13″ equities with the heaviest daily option volume (based on a 20-trading-day rolling average).
Tuesday’s Notable Option Activity–
Dell (DELL):
We could be seeing a reversal of the negative trend in Dell, as the stock experienced a technical bounce higher in Tuesday’s trading. www.ONN.tv Options Instructor Kevin Cook, author of the Buy and Trade column, observed that the stock bounded higher off its 200-day moving average, which is currently perched at $13.13.
Options volume has been relatively anemic in the shares of late, but yesterday we saw some call buying at the January 14 call. In the final hour of the trading day, mid-sized blocks came through on this out-of-the-money option, trading near or at the ask price. All told, nearly 7,000 calls traded during the day, versus existing open interest of 25,295. The option closed 11 cents higher on the day, compared with a 33-cent jump in DELL shares to $13.51.
In order to break even on this long call, investors who bought these options for an average of 33 cents per contract need DELL to advance to $14.33 by January expiration one month from yesterday. On the flip side, the maximum potential profit is theoretically unlimited.
General Electric (GE):
GE was in the news Tuesday amid JPMorgan-fueled rumors that the conglomerate could be considering buying out Rockwell Automation (ROK). Shortly before the close, GE began its outlook investor meeting, noting, among other things, that the worst was behind the financial-services arm of the company.
Amid all of this excitement, we observed heavy put buying at the January 2011 12.50 strike. About an hour after the opening bell sounded, a massive block of 10,000 contracts changed hands at this LEAPS strike, trading for $1.15 per contract (to make the block worth $1.15 million). This was the ask price at the time, suggesting the trade was initiated by buyers. At the close, this put was five cents higher on the day, compared to the 20-cent drop in the shares to $15.75. Open interest expanded at the strike from 142,005 to 151,538.
Research in Motion (RIMM):
All you BlackBerry devotees out there, remember that RIM will report earnings tomorrow after the close. Analysts are expecting per-share results of $1.04, which would mark a 25% advance from year-ago numbers. Last quarter, RIMM surprised to the upside by three cents per share.
The front-month December 65-strike straddle on RIMM is currently priced at $5.64, meaning the options market predicts a move of this magnitude between now and Friday’s expiration. That’s a move of 8.8% in either direction in the next three trading days. In other words … buckle your seatbelts, as expectations for a volatile ride are high.
The ONN Lucky Thirteen: The 13 stocks with the heaviest option volume during the past 20 days.
Two Traders, One Strategy Steve and Jared take a look at risk management strategies on the OH platform.
Navigating OptionsHouse Get to know the OH platform and all the tools you have at your disposal.