Trader thinks Marathon isn't tired yet
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring system detected the purchase of 5,174 July 75 calls for $2.20 and the sale of an equal number of July 55 puts for $1.25. Volume was more than 25 times open interest at each strike, indicating that these are new positions.
If MPC continues to climb, the long calls will appreciate and the short puts will lose value, while the opposite is true to the downside. The trade cost $0.95. The main way it differs from owning shares is that it will track the stock price less closely as time progresses, becoming worthless if the stock remains between $55 and $75. (See our Education section)
MPC rose 2.93 percent to $67.50 yesterday and is up 48 percent in the last six months. The Ohio-based company has been rallying along with most other oil refiners as an improving economic environment draws investors back to the energy sector.
Yesterday's strategy offers some potential advantages over simply owning the shares. The first is its cost, lowering the entry price by more than 98 percent. It also effectively programs a buy order at $55 if the shares retreat to that level.
Given that the investor already likes MPC, he or she might be willing to get long on a pullback. Total option volume in the name was 11 times greater than average in the session.