Options Trading News

February 1, 2013  Fri 5:15 AM CT

Traders have been extremely active in Phillips 66 for months, and the bulls were back yesterday.

optionMONSTER's Heat Seeker system detected heavy buying in the March 65 calls, with some 5,500 contracts trading against open interest of just 612 contracts. The first blocks priced for $0.90, but premiums then climbed to $1 as the activity heated up.

Those long calls have locked in a $65 entry price on the red-hot oil refiner for the next 1-1/2 months, no matter how high the stock goes. The trader stands to generate some nice leverage in the event of a continued rally, but the contracts can also become worthless if it doesn't move. (See our Education section)

PSX fell 0.31 percent to $60.57 yesterday but is up 85 percent since getting spun off from ConocoPhillips last May. It's been climbing along with other refiners as an improving economy draws investors to the energy sector. Profit also beat expectations when the company reported earnings on Wednesday.

Total option volume was slightly above average in the name yesterday, with calls outnumbering puts by a bullish 4-to-1 ratio.

(A version of this post appeared on InsideOptions Pro yesterday.)
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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.

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