Trader sees a floor in HollyFrontier
Chris McKhann | [email protected]
optionMONSTER systems show that a trader bought 3,960 September 44.50 puts for $2.35 and another block of 1,933 for $2.40 a minute later on Friday. The volume was below the strike's previous open interest of 11,779.
Corresponding blocks of the December 42 puts were sold for $2.95 and $2.90. The open interest at that strike was just 329 contracts before the trade appeared, so it is clearly a new position.
The trader appears to have bought back the September short puts that are in the money and expiring at the end of this week. He or she then replaced them with the out-of-the-money short puts in December, taking in more premium in the process.
The trader will keep the credit from that put sale as profit if shares remain above $42 through expiration in mid-December. If HFC is below that level, the trader will face the obligation to buy the shares at effective prices of $39.10 and $39.05 once the credit is included. Investors sometimes sell puts this way in hopes of buying stock at a discount. (See our Education section)
HFC was up 0.55 percent on Friday to close at $42.04. It was down at support at $40 in early July but was testing resistance at $46 through much of August.
More than 15,000 HFC options change hands already, compared to a daily average of 3,209.