OptionsHouse

Options Trading News

February 24, 2012  Fri 10:17 AM CT

STO: SEE CHART GET CHAIN FIND STRATEGIES
One big investor is playing the calendar in Statoil.

optionMONSTER's tracking systems detected the purchase of 2,000 October 30 calls for $1.22 and the sale of an equal number of April 30 calls for $0.32, resulting in a cost of $0.90. Volume is above open interest in both strikes.

Known as a calendar spread, this trade can make money in two ways. One is that STO remains below $30 through April expiration, rendering the short calls worthless. The net value of the spread would increase if that occurs because the October calls wouldn't depreciate as much given their greater lifespan.

The other possibility is that the trader simply holds the October long calls in hope of a longer-term rally. In either case, the strategy will lose money if the stock pushes above $30 in the next eight weeks. (See our Education section)

STO is up 1.66 percent to $28.18 today and 20 percent in the last three months. The Norwegian oil stock hasn't traded above $30 since mid-2008, which could help explain the thinking behind today's spread.

Overall option volume is 6 times greater than average so far today.
Share this article with your friends


Invest Like a Monster - San Antonio: October 9-10

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Archived Webinar

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »