Without any notable news on
Nexen Inc. (NYSE: NXY )
on Monday, shares of the company are rallying and outperforming the
broader market strength during afternoon trading. Options volume in
the December expiration month was active on Monday thanks to at
least one bullish investor.
NXY shares gained 37 cents, or nearly 2%, to $21.17 as of 3 p.m.
EDT. The company did not announce any news today, and it's been
weeks since its better-than-expected earnings announcement. The
market does not expect the company's next earnings release until
Just before noon EDT, an investor bought 3,000 December 22.5
calls for $1.05 per contract, bought 7,500 December 25 calls for 42
cents per contract, and sold 12,600 December 17 puts for 50 cents
per contract. Current open interest in the puts is 544 contracts
while the lower-strike calls is 216 contracts and the higher-strike
calls are home to current open interest of 278 contracts. The
investor opened this premium-neutral trade to bet on upside
throughout the next few months.
The investor collected a total of $630,000 for the puts and paid
the same amount of money for the calls. A look at the graph below
shows the investor will turn profits at December options expiration
if NXY shares are trading higher than $22.50 at expiration. This
position could theoretically turn unlimited profits if the stock is
trading higher than this level at expiration.
The investor does not collect any returns, but also does not
lose any, if the stock is trading between the put strike and the
lower call strike. Once the stock drops below $17.50, however, the
investor will lose money as the stock continues to drop toward