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December 4, 2012  Tue 3:47 AM CT

MPC: SEE CHART GET CHAIN FIND STRATEGIES
Marathon Petroleum drew bullish option activity for the second session in a row yesterday while the stock posted an all-time closing high.

More than 10,000 January 62.50 calls traded in a strong buying pattern, including a single print of 8,053 that went for $1.30. The volume was more than twice as high as the strike's open interest at the beginning of the day, indicating new positions.

That followed call buying at the December 60 strike on Friday. The company is scheduled to present today at the Wells Fargo Pipeline, MLP, and Energy Symposium in New York.

MPC rose a penny to finish yesterday at $59.55, its highest close since the company was spun off from Marathon Oil in July 2011. The oil refiner's shares have been running up since breaking above their 50-day moving average in mid-November.

Yesterday's call buyers are looking for MPC to gain more than 7 percent by mid-January. The traders could sell those options earlier if a rally pushes premiums higher before then, but the calls will expire worthless if the stock doesn't rise. (See our Education section)

Total option volume in the name yesterday was 5 times its daily average in the last month. Only 329 puts changed hands in the entire session, a reflection of the day's bullish sentiment.
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Education & Strategy

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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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