Berry Petroleum draws cautious trade

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Traders are hedging their bets in Berry Petroleum after a big rally in the Denver energy company.

optionMONSTER's Depth Charge monitoring program detected the purchase of 3,000 August 35 puts for $0.80 and the sale of a matching number of August 45 calls for $1.30. Volume exceeded the previous open interest in each strike, indicating that new positions were initiated.

The transaction resulted in a net credit of $0.50 and obligates the investor to sell BRY shares for $45 if they're above that level on expiration. The trader has also locked in a minimum sale price of $35 in the event of a selloff.

Known as a collar , the strategy is a common hedging technique used by investors looking to protect a long position. (See our Education section for other ways to manage risk.)

BRY rose 0.54 percent to $42.67 yesterday and is up 27 percent so far this year. Most of that gain occurred between December and March, followed by a slow drift lower in recent months.

Total option volume was 14 times greater than average in the session, according to the Depth Charge.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: BRY

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