Market 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.
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