Fidelity National draws income strategy

optionMONSTER

One investor is turning time into money with Fidelity National Financial.

optionMONSTER's tracking systems detected the sale of 5,490 October 20 calls in the title-insurance company for $0.42. An equal number of September 20 calls was purchased at the same time for $0.20, but volume was below open interest in that strike.

This suggests that an existing short position was closed and rolled forward in time. The investor probably owns shares and previously sold the September calls to earn income. By adjusting the position yesterday, he or she received an additional $0.22 of premium while agreeing to stay in the trade for an additional month. (See the discussion of covered calls in our Education section for more.)

FNF rose 1.23 percent to $19.79 yesterday. It fluctuated violently after the 2008 mortgage-market collapse, then spent the next two years consolidating in a range. In the last 12 months, however, it's been working its way higher as earnings improve and sentiment brightens in the housing the housing market.

Given this stronger backdrop, some observers may consider FNF a fairly safe bet into the foreseeable future. Such companies are often used in covered call trades, where upside contracts are sold to earn income on a long stock position. Investors can also collect a 2.9 percent annual dividend yield in the process.

Overall option volume in FNF was more than 50 times greater than average in yesterday's session.

More From optionMONSTER

View Comments