One investor in Watson Pharmaceuticals options is learning discipline the hard way.
On Nov. 25 optionMONSTER's Heat Seeker tracking program detected heavy buying in the December 65 calls for $1.45. The shares proceeded to rally and those calls had more than doubled to $3.60 by Tuesday morning , when we suggested that InsideOptions subscribers might want to take the money and run.
Unfortunately, the original investor whose actions we tracked last week did not do the same, and all those profits are now gone. This morning, that trader rolled part of the position, hoping that WPI will push higher once again.
optionMONSTER's monitoring programs today detected the sale of about 1,300 December 65 calls for just $1.30 and the purchase of an equal number of February 65 calls for $3.50. This means that, instead of collecting a profit of more than $2 in less than a week, the investor paid an additional $2.20.
In return, the trader receives an additional two months to profit from a rally--all because he or she didn't take profits earlier. Whether it was greed or negligence, this investor is paying the price today.
WPI is down 1.7 percent to $62.92. Overall option volume is triple the daily average so far today, with calls outnumbering puts by 16 to 1.
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