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Options Trading News

December 28, 2012  Fri 4:45 AM CT

VLO: SEE CHART GET CHAIN FIND STRATEGIES
Valero is not far from its highs of the year, and one trader is looking for more gains in the oil-refining company.

optionMONSTER's Heat Seeker tracking system detected the purchase of 3,000 January 36 calls in a single print for $0.31 yesterday. This is a new position, as the volume was above the strike's open interest of 2,564 contracts before the session began.

VLO rose 0.45 percent yesterday to close at $33.83. Shares had gone on a scorching run from $20 to its 52-week high of $34.49 from early June to mid-September, then pulled back to support at $28 before resuming its climb.

Yesterday's long calls, which lock in the price where traders can buy the stock, are looking for VLO to rise roughly 9 percent in the next three weeks. If the shares are below the $36 strike price at that time, the calls will expire worthless. (See our Education section)

Overall calls in the name outnumbered puts by nearly 4 to 1.
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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.

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