OptionsHouse

Options Trading News

April 30, 2013  Tue 12:20 PM CT

PSX: SEE CHART GET CHAIN FIND STRATEGIES
Investors are looking for fireworks when Phillips 66 issues quarterly results tomorrow morning.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 10,000 May 67.50 calls for $0.25 and the sale of an equal number of May 70 calls for $0.05. That translates into a cost of just $0.20.

If PSX closes at $70 on expiration, that investment will inflate to $2.50 in value--a profit of 1,150 percent from the shares moving less than 20 percent. Their 52-week high is $70.52, so a rebound to that peak is expected. (See our Education section for more on the strategy, known as a bullish call spread.)

Volume was below open interest in the 70s, so it is also possible that the investor closed an existing position at the higher strike and rolled it down to the 67.50s. That would also be bullish, as it reflects a belief that the stock will bounce.

PSX is down 1.91 percent to $60.62 in afternoon trading. The energy stock more than doubled between June and late March but has been pulling back since. Earnings have beaten expectations for at least four straight quarters.

Total option volume is quadruple the daily average, with calls outnumbering puts by 8 to 1.
Share this article with your friends


Related Stories

PSX

What's behind put spike in Phillips 66

February 9, 2016

The oil-refining company is down 19 percent in the last three months, and one big put buyer is positioning for more downside potential.

OptionsHouse

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »