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Markets

Bull takes out policy with Allstate calls

Allstate is attempting to rebound, and one investor is feeling bullish.

optionMONSTER's Heat Seeker tracking system detected a surge of call activity in the Illinois-based insurer. Roughly 26,000 January 30 calls were bought for $0.60 and an equal number of January 32 calls were sold for $0.25, resulting in a net cost of $0.35.

Volume was below open interest in the lower strike, so there are two possible explanations for the trade. One is that an investor owns the stock and had sold the January 30s as part of a covered call trade. He or she then rolled that position to the 32s, giving them the right to collect an additional $2 of upside on the shares.

The second possibility is a new bullish call spread was opened, with the potential to earn 471 percent if ALL closes at or above $32 on expiration. (See our Education section)

The stock is down 1.09 percent to $25.39 in afternoon trading and has lost 23 percent of its value in the last three months. Storm damage caused it to lose money when it issued results on Aug. 1, but the red ink was less than feared and revenue exceeded expectations.

Overall option volume in ALL is 6 times greater than average so far today, with calls outnumbering puts by 110 to 1.

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.


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

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