Buyers keep coming back to Spectra
David Russell | [email protected]
On May 30, optionMONSTER's Heat Seeker monitoring system detected buying in the September 33 calls for $0.40 and $0.45. Less than two weeks later, the company announced the transfer of pipeline assets to its limited partnership in a move that would lower taxes and boost dividends. The stock exploded higher, and those calls appreciated by more than 400 percent.
Now they're adjusting the trade, selling about 24,000 of the contracts for $2.50 and buying 16,000 September 36s for $1.10. The transaction let the investor collect a credit of $4.24 million and keeps him or her in the game for further upside. (See our Education section for more on how to manage risk with options.)
SE rose 0.73 percent to $34.59 yesterday and is up 25 percent so far this year. It's been riding a wave of enthusiasm toward domestic natural gas as the United States reemerges as a major player in the energy industry. The shares are also currently sitting near all-time highs.
Another investor took a more conservative stance and has been selling upside calls to smooth a long position in the stock. In a separate trade yesterday, our scanners showed that 2,300 June 31 calls were bought for $3.80 in volume below previous open interest while a similar number of September 37s was sold for $0.70.
This suggests that an existing short position was closed and rolled to the higher strike. Adjusting the trade cost $3.10 but gives the trader the right to earn an additional $6 on the underlying position in the shares.
Total option volume was 9 times greater than average in the session, according to the Heat Seeker. Calls outnumbered puts by more than 12 to 1.