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Big covered call in Standard Pacific

David Russell (david.russell@optionmonster.com)

Time is money for one investor in Standard Pacific.

optionMONSTER's tracking systems on Friday detected the purchase of 5,000 January 2015 7 calls for $2.29 and the sale of an equal number of January 2016 7 calls for $2.80. Volume was below open interest in the nearer-dated strike, which suggests that an existing short position was closed and rolled forward in time.

The trader almost certainly owns shares in the California-based homebuilder and had sold the contracts as part of a covered-call strategy . Making the adjustment lets him or her collect an incremental $0.51 of income. If the trade were to be repeated each year, that's tantamount to a 6 percent yield based on the stock price.

That income is secure as long as the stock remains above $7 through expiration. It found support around that level last summer, so the investor probably considers it a relatively safe bet. (See our Education section for more on the strategy, which profits from the time value of options .)

SPF fell 3.2 percent to $8.47 on Friday and has spent the last year between about $7 and $10. More than 10,400 contracts changed hands, compared with fewer than 500 in an average session.

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