Allstate strategy turns time into money


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Investors are turning time into money with Allstate.

optionMONSTER's monitoring systems detected the sale of 13,000 January 33 calls for $2.34 and the purchase of an equal number of January 32 calls for $2.99. Volume was below open interest in the 32s, indicating that an existing short position was closed and rolled to the higher strike.

The investor probably owns shares in the Illinois-based insurance company and is selling calls against the stock to earn income. In adjusting the position for $0.65 yesterday, the trader raised by $1 the level at which he or she must sell the shares.

Selling calls is a common strategy that reduces volatility and makes an equity position behave more like a fixed-income investment. Quarterly cash dividends can also be collected while holding the stock to further offset its cost. (See our Education section)

ALL fell 1.29 percent to $33.65 yesterday but is up more than 45 percent since early October. The stock is now back near the level where it hit resistance in 2010 and 2011, which could be leading some chart watchers to expect it to churn in a range.

Shortly after the January puts traded, an investor bought back more than 6,000 October 35 calls for $0.76 and sold the January 36s for $1. A similar trade also occurred in the January 33 calls and the August 33s for a net credit of $0.52.

Overall option volume in ALL was 41 times greater than average in the session.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: ALL

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