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.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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