Call Volume Surges Again On Lender Processing Services

(This is an excerpt from an article I originally published on Seeking Alpha on February 12, 2012. Click here to read the entire piece.)

Perhaps I should all the recent call option activity in Lender Processing Services (LPS) should not surprise me given a massive foreclosure deal between banks and federal and state governments arriving ahead of earnings on February 13. However, after seeing single-day large call volume in December and then again on February 6, I was caught off guard observing yet another surge in call action on February 7. This time, 1200 calls traded on the March $18 strike. Open interest at this strike is now 4,991 call options.

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LPS trades around its 200DMA as call volume continues to surge
LPS trades around its 200DMA as call volume continues to surge

Given the lukewarm reaction to this latest scramble for calls, I began to wonder whether the primary motivation for the call volume was to capture risk premium ahead of earnings and/or covered call action to hedge existing shares. Accordingly, I decided to sell March $17 calls against some of my own stock.

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Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on February 12, 2012. Click here to read the entire piece.)

Full disclosure: long LPS shares and short calls

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