Use All Your Options

  • July 10, 2001
  • Duke Heberlein

Abnormally high options volume can often provide a tip off to unusual insider
activity in the underlying stock. Many times, the increase in volatility in the
front month in the money and close to the money calls are an implication of speculative activity, hoping to capitalize on the move in the underlying when
the news comes out.

 

7-6-2001

Options Alerts

    Abnormal
Call Volume

  • Calpine
    (
    CPN |
    Quote |
    Chart |
    News |
    PowerRating)    ;     The underlying has
    gapped out of a low-level consolidation in today’s session. There is
    abnormally high call volume across the July and August 40 and August 45
    calls. CPN is now up 5.63 at 42.99.

 

 

Keep in mind that this strategy is speculative and a little
risky. The best way to play these alerts is to take a look at the chart and use
the option activity to play a pattern entry or support another technical
indication.

 

 

The stock has managed to gain another 2 points since the alert
last Friday, and looks to be retesting the June 11 swing high. CPN may be worthy
of further observation.

Again, keep in mind this is not a system or blind signal to go
and buy or sell the underlying — and it does have some risk. However, this
method will often front run some monster moves, so train yourself to take a look
at the stocks profiled when a option alert pops up. Then keep the stock on your
watchlist.

Until tomorrow,

Duke