Options Trading News

October 16, 2012  Tue 2:14 AM CT

One investor wants to take the money and run in Valero Energy.

optionMONSTER's Depth Charge tracking system detected the purchase of 3,600 December 22 puts for $0.24 and the sale of an equal number of December 26 calls for $3.05. Volume was more than 4 times open interest at each strike, and the trader collected a credit of $2.81.

He or she probably owns shares in the oil refiner, and this strategy will let them manage an exit from the position. Writing the calls locks in an exit price of $26 while the puts ensure a minimum selling price of $22. (See our Education section)

Including the credit earned, the maximum sale price would be $28.81 and the minimum sale price would be $24.81. If the stock closes between the strike prices on expiration, the trader will keep the shares and pocket the $2.81.

VLO fell 0.69 percent to $28.81 yesterday. It rallied about 60 percent between early June and early September but has been drifting lower since. Total option volume in the name was more than twice average amounts in the session, according to the Depth Charge.
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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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