Options Trading News

April 12, 2013  Fri 3:16 AM CT

For at least the third time this month, the bulls are targeting Occidental Petroleum.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 10,000 May 87.50 calls for $1.19 and the sale of an equal number of May 95 calls for $0.11. Volume exceeded open interest at both strikes, indicating that new positions were initiated to create a vertical spread.

The investor now controls the $7.50 spread between the two strike prices if the stock closes at $95 or higher on expiration. The trade cost $1.08 to open and can result in a profit of 594 percent from the shares moving less than 15 percent. (See our Education section for more on how to generate leverage with options.)

OXY rose 3.49 percent to $84.20 yesterday and has been drifting sideways for the last 2-1/2 years. The option activity started turning bullish this month as traders snapped up contracts expiring in May and August. Both of those have already appreciated by more than 50 percent.

More than 60,000 OXY contracts traded in total yesterday, compared with about 13,600 in a typical session. Calls outnumbered puts by a bullish 6-to-1 ratio.
Share this article with your friends



The fastest money in the market
View full report »

Premium Services

Archived Webinar

Education & Strategy

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.

View more education articles »