Options Trading News

June 26, 2013  Wed 4:45 AM CT

Traders are hedging their bets in Berry Petroleum after a big rally in the Denver energy company.

optionMONSTER's Depth Charge monitoring program detected the purchase of 3,000 August 35 puts for $0.80 and the sale of a matching number of August 45 calls for $1.30. Volume exceeded the previous open interest in each strike, indicating that new positions were initiated.

The transaction resulted in a net credit of $0.50 and obligates the investor to sell BRY shares for $45 if they're above that level on expiration. The trader has also locked in a minimum sale price of $35 in the event of a selloff.

Known as a collar, the strategy is a common hedging technique used by investors looking to protect a long position. (See our Education section for other ways to manage risk.)

BRY rose 0.54 percent to $42.67 yesterday and is up 27 percent so far this year. Most of that gain occurred between December and March, followed by a slow drift lower in recent months.

Total option volume was 14 times greater than average in the session, according to the Depth Charge.
Share this article with your friends


Premium Services

Education & Strategy

The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

View more education articles »