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May 9, 2013  Thu 11:08 AM CT

MWE: SEE CHART GET CHAIN FIND STRATEGIES
One investor is adjusting a bullish trade in MarkWest Energy Partners, which has gone straight since November.

optionMONSTER's Heat Seeker monitoring program detected the purchase of some 11,000 August 67.50 calls for $1.60 and the sale of some 10,400 August 62.50 calls for $3.70. Volume was below open interest in the 62.50s, which suggests that an existing long position was closed and rolled to the higher strike.

He or she collected a credit of $2.10, which probably represents their initial investment in the calls. They remain exposed to further upside, but are now risking only profits. (See our Education section for more on how options can be used to manage trades.)

MWE is up 2.29 percent to $64.73 this afternoon and 27 percent so far this year. The pipeline stock broke above its previous all-time high from 2012 in late April and has been consolidating since. Based on today's activity, the investor thinks that it will keep on running.

Pipelines have emerged as a major group within the energy sector as the domestic production surges within the United States.

Total option volume is quadruple the daily average in MWE, according to Heat Seeker. Calls outnumber puts by 54 to 1.
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Education & Strategy

Sweet Spot Exceptions

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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