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May 28, 2013  Tue 3:47 AM CT

RIG: SEE CHART GET CHAIN FIND STRATEGIES
Transocean has been trapped in a range all year, but one trader is betting that the stock will go higher.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 June 50 calls for $1.97 and the sale of an equal number of June 55 calls for $0.27. Volume was below open interest in the 55s, so there are two possible explanations for the trade.

One is that the had investor previously owned those contracts and is rolling a long-call position to the lower strike, reflecting the drop in the oil-servicing stock. The adjustment cost $1.70 and keeps the calls in a close correlation to the stock price because it increased their delta. (See our Education section)

Alternatively, both halves of the trade may have been done to open new positions. In that case, it is a bullish call spread, also done for a cost of $1.70. The position controls the $5 spread between the two strike prices, translating into a profit of 194 percent on a move to $55.

RIG finished Friday up 0.19 percent to $52.06 and has been snaking in a range for months. Total option volume was more than twice the daily average, with calls outnumbering puts by 8 to 1.
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Options Academy: Ron's Risk Calculation--A Real Life Example

It is rare that I get a chance to give a real-life, real-time example in my articles that the readers were not only following but were actually involved in at the time the event is happening. Well, that is where we are right now in our QQQ trade from last week. Let's recap the trade itself.

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