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Every day, I keep tabs on the options market, looking for activity of interest that I can use not only to inform my own decisions, but to illustrate basic options strategies and concepts for Seeking Alpha readers and subscribers to my options investing newsletter.

Bullish activity rears its head once again in Pandora (NYSE:P). Briefing.com's InPlay Plus service alerted me to the action twice, prompting me to take a closer look. The stock went on a wild ride Monday, opening lower and trending down with the broader market, touching as high as $8.90.

(click to enlarge, courtesy of Yahoo Finance)

Options traders supported heavier-than-normal volume in both the P June $9 and $10 calls. There's no news to support the bullishness that I know of and I think Facebook's (NASDAQ:FB) revenue announcement came after the move in Pandora. In any event, I am not sure why Facebook news would move Pandora more than Zynga (NASDAQ:ZNGA), which also rebounded, but not nearly as much as P.

In any event, if you're long the stock with a cost basis below $10.00, this might present a good opportunity to sell the $10 or $11 May calls to generate some income. Pandora has yet to announce a date for its next earnings report, however, I expect it to come next month, quite possibly after options expiration. If it comes after, I would have to think you will not see your shares called away on a short $10 or $11 call. You never know, though, so, as a rule, try not to enter covered call trades if you'll fret over getting assigned.

Fellow Seeking Alpha contributor Frederic Ruffy highlighted interesting bearish (and profit-taking) activity in Conoco-Phillips (NYSE:COP) Monday:

Shares are down 26 cents to $72.62 and an Aug 60 - 70 put spread trades on the oil company at $2.30, 9400X on AMEX, and $2.25, 5000X on PHLX. The activity likely closes some of the positions opened in mid-March and highlighted in WhatsTrading Premium on March 15 when the same spread was bought for $1.50, 20500X to open. Shares are down on earnings news today and have lost 5.2% since that time. Today's spread trader is taking money off the table now that the earnings event risk has passed.

This trade brings up something pretty basic about options. As basic as it may seem to intermediate-level and experienced traders, it, like many points about options, confuses beginners. I get emails on this subject regularly.

The trader in Ruffy's example opened a spread some time ago, incurring a debit of $1.50 to enter the position. With a trade size of 20,500, that means the trade took just over $3,000,000 to put on. When you have a spread, or any other options trade for that matter, you do not have to wait for expiration to close it. You can close single or multi-leg positions, all or in part, whenever you want. It often makes sense to do this.

In the COP example, the trader looks to have unloaded 14,400 of the spreads at an average of roughly $2.28, which translates into proceeds of about $3.3 million. That takes the original investment and them some off of the table, as the trader waits for further downside in the stock and appreciation in the spread. Good move.

Source: Options Activity For Monday And What It Means