Market News

July 11, 2013  Thu 2:45 AM CT

A bullish call spread led the option trade in Linn Energy yesterday as shares continued to recover lost ground.

A trader bought 2,200 January 25 calls for the ask price of $4.30 and, at the same time, sold 4,400 January 30 calls for the bid price of $2, according to optionMONSTER's Heat Seeker tracking system.  

This strategy, known as a ratio spread because twice as many contracts were sold than bought, costs the trader just $0.30, which is the amount at risk if LINE is anywhere below $25 at expiration in mid-January. The maximum gain would come if shares are around $30 at that time, but above that level the trader would be effectively short shares. (See our Education section)

LINE gained 2.5 percent yesterday to close at $26.64. Shares tumbled last week after it was announced that the company was being investigated for possible violations of securities laws. The stock hit a low of $20.25 on Friday after trading above $33 at the start of that week.
News Archives
OptionsHouse

Education & Strategy

Election Sector Rotation

Sector rotation is the process where mutual funds, portfolio managers, and investors in general, shift their investments from one sector of the economy to another.

More education articles »