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July 16, 2013  Tue 12:20 PM CT

YPF: SEE CHART GET CHAIN FIND STRATEGIES
The bulls are betting that Argentine oil driller YPF is ready for a comeback.

The stock cratered in April 2012 after politicians in Buenos Aires announced plans to push out Spain's Repsol as the main investor before settling at nine-year lows. Now that the shares have been climbing, one investor is rolling a winning trade higher.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 9,200 October 17.50 calls for $0.85 and the sale of an equal number of July 15s for $1.10. Volume was below the previous open interest in the 15s, so it appears that an existing long-call position was closed and moved to the higher strike.

Adjusting the trade let the investor collect $0.25 while remaining long the name for an additional three months. That way the trader won't miss a huge rally but will also have limited risk if the stock tanks. (See our Education section for more on how to manage risk with options.)

YPF trading at $16.21 this afternoon, up 1.95 percent on the day and 23 percent in the last three months. While the fight with Repsol clearly scared some investors, Chevron struck a deal with the company in May to develop its potentially massive Vaca Muerta shale-gas formation. That could give some investors confidence that the worst of the uncertainty is over. It also trades at less than book value.

Overall option volume is 35 times greater than average in the name so far today, according to the Heat Seeker. Calls account for a bullish 87 percent of the total.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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