AmerisourceBergen sees covered call

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AmerisourceBergen is in the midst of a steady uptrend, and one investor is using options to smooth the ride.

optionMONSTER's tracking systems detected the purchase of 1,660 July 42 calls for $0.75 and the sale 2,150 August 43 calls for $0.90. Volume was below open interest in July but not August, suggesting that a short position was rolled forward by one month and up to the higher strike.

The trade was probably the work of an investor who owns shares is the drug distributor and has been selling calls to earn income. Adjusting the position yesterday allows the trader to collect an additional $1 of upside on the stock plus a small credit while increasing the number of contracts.

ABC fell 0.07 percent to $42.28 yesterday and is up 24 percent so far this year. It touched an all-time high of $43.47 last week. The last earnings report on April 28 beat estimates, and management raised full-year guidance.

Companies in the industry have been climbing for years by helping health insurers cut pharmaceutical costs. Investors often use covered call strategies on such names to craft positions that perform similarly to bonds, with defined profit and modest risk. (See our Education section)

ABC's next earnings report is scheduled for the morning of July 28.

Overall option volume in the name was 8 times greater than average, with calls outnumbering puts by 5 to 1.



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

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


This article appears in: Investing , Options

Referenced Stocks: ABC

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