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What's behind Paccar call selling

David Russell (david.russell@optionmonster.com)

One investor is using options to while away the time in truck maker Paccar.

Our tracking systems detected the purchase of 1,530 October 57.50 calls for $0.10 and the sale of a matching number of November 57.50 calls for $0.60. Volume was below open interest in the October options, which suggests that an existing short position was closed and rolled forward.

The trader probably owns PCAR shares and sold the contracts to earn income while holding the position. Adjusting the trade generated an additional $0.50 of premium and keeps the investor in the trade for an another month. (See our Education section for more on the strategy, known as a covered call .)

The investor is now on the hook to sell their shares for $57.50 if they're above that price on expiration. That's close to the level where it peaked last month, so he or she probably expects the recent trading range to remain in effect.

PCAR rose 0.31 percent to $52.24 yesterday. It rallied more than 50 percent between July 2012 and July 2013 but has gone nowhere since. Earnings have mostly been strong this year amid improving vehicle demand. The next quarterly release is scheduled for Oct. 29.

Total option volume was 9 times greater than average in the session, with calls outnumbering puts by 36 to 1.

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