AOL has pulled back after a huge rally, and now investors are
logging back on.
optionMONSTER's tracking programs detected heavy
in the Internet stock on Friday, along with some moderate
The biggest trade appeared in the February 27 puts, with some 5,000
sold for $0.65 against open interest of just 12 contracts. The
seller is now obligated to buy AOL shares for $27 if they close
below that level on expiration, but if it remains above $27 they
will keep the $0.65 and the puts will expire worthless.
AOL closed at $29.43 on Friday, down 1.24 percent on the session.
It began 2012 trading for about $15, shot up to $43.93 and has been
retreating since. The shares are now back near the same level where
they peaked in July, which could make some chart watchers expect
buyers to step in.
The advantage of selling puts is that can yield profits when a
stock doesn't rally or even declines slightly. The risk is that a
big drop can be very painful. (See our
Activity shifted to the April 26 puts near Friday's close, with
almost 4,600 sold for $0.95 versus previous positioning of just 69
contracts. The session also saw the purchase of more than 2,400
February 30 calls for $1.35 to $1.45. Those are more aggressively
bullish because they require a move higher to make money.
Total option volume in AOL was 10 times greater than average.
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