Options Trading News

May 21, 2013  Tue 5:16 AM CT

Energy producer Apache bounced at its 200-day moving average, and the bulls are looking for steady gains.

optionMONSTER's tracking programs detected the purchase of 10,000 January 90 calls for $3.51 and the sale of an equal number of January 100 calls for $1.36. Volume was more than quadruple open interest at each strike, indicating new activity.

Owning calls locks in the price where investors can buy shares, while selling them fixes a maximum exit level. Combining the two strategies lets them control the spread between two prices at low cost.

For instance, yesterday's Apache trader paid just $2.15 to open the position and will collect $10 if the stock closes at or above $100 on expiration. That's a profit of 365 percent in the options from a move of less than 20 percent in the share price. (See our Education section for more on how options can be used to generate leverage.)

APA rose 3.42 percent to $84.08 yesterday and is up 24 percent since hitting a four-year low last month. The natural-gas and oil producer is one of several energy companies that have rallied in recent weeks as investors turn bullish on the global economy.

Total option volume was 5 times greater than average in Apache yesterday. Calls accounted for a bullish four-fifths of the total.

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

Share this article with your friends

Related Stories


Apache gets a vote of confidence

September 16, 2015

The energy sector has come back to life, and traders are betting that downside potential will be limited for the natural-gas and oil producer in the next month.


Premium Services

Archived Webinar

Education & Strategy

Options Academy: More on the Covered Call Strategy

Last week, we talked about the Covered Call and the misconceptions that surround it. We spoke about how an investor must realize that the Covered Call is actually a premium collection strategy and not so much a directional one. If an investor can grasp this idea, the investor stands to do a heck of a lot better in the strategy than they currently do.

View more education articles »