OptionsHouse

Options Trading News

October 16, 2012  Tue 2:14 AM CT

VLO: SEE CHART GET CHAIN FIND STRATEGIES
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.
Share this article with your friends


Related Stories

VLO

How Valero calls are betting on rebound

April 22, 2016

The oil refiner is down 9 percent in the last month, but traders are looking for that trend to reverse in the weeks after quarterly results on May 3.

OptionsHouse

Premium Services

Education & Strategy

Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

View more education articles »