Options Trading News

May 6, 2014  Tue 4:45 AM CT

A large trader is looking for BP to break out of a six-month range.

optionMONSTER's Heat Seeker system shows that 5,700 July 47 calls were sold for the bid price of $3.80 as 5,700 October 52.50 calls were bought for the ask price of $0.99 yesterday. Volume was below previous open interest in the nearer-term contracts but above it in the later strike.

The investor is apparently closing the July calls, which are now well in the money, and rolling the position to the higher strike three months later while taking some money off the table in process. The new long calls are looking for BP to climb to new four-year highs by mid-October but will expire worthless if shares remain below $52.50. (See our Education section)

BP was down fractionally yesterday to close at $50.81. Since gapping up from below $44 last October, the energy company has been bouncing mostly between $46 and its $51--its highest level since May 2010.

Total option volume in BP topped 23,600 contracts yesterday, triple its daily average for the last month. Overall calls outpaced puts by more than 3.5 to 1.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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