Options Trading News

December 19, 2012  Wed 12:20 PM CT

An enormous call spread tops today's option activity in Phillips 66 as the stock remains near its highs.

optionMONSTER systems show that 113,000 PSX options have traded, more than 5 times its daily average in the last month. Almost all of the action is in one three-way call spread.

A trader sold 20,000 January 48 calls for $5.10 and 24,747 January 49 calls for $4.20. The open interest at each strike was more than 40,000.

Second later, the trader bought 53,136 January 55 calls for the ask price of $1.15. That volume was twice the strike's open interest at the start of the session and therefore a new position.

This appears to be a roll of the in-the-money calls up to the higher out-of-the-money strike. The trader would be taking profits off the table while maintaining upside exposure. (See our Education section)
PSX is down 0.79 percent to $52.75 in afternoon trading but isn't far from the $53.58 close from Monday of last week, which was a high for the stock. Shares of the oil-refining and chemical company were below $29 in early May.
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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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