Hedging a long position in Marathon

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One investor wants to protect a long position in Marathon Oil, which has been climbing despite weakness in the broader energy sector.

optionMONSTER's Depth Charge monitoring program detected the purchase of 2,500 April 28 puts for $1.70 and the sale of an equal number of April 32 calls for $1.35. Volume exceeded open interest at each strike, indicating that new positions were implemented.

The trade cost $0.35 and will profit from downside in the Houston-based oil driller. The strategy, known as a collar , ensures a minimum selling price of $27.65 and forces the trader to exit the position if it rallies above $28.

MRO fell 0.33 percent to $29.86 yesterday. It's up 14 percent in the last six months while the broader energy sector is higher by just 3 percent in the same period. The stock also faces potential resistance around $28, a level where it struggled in 2011 and then was support and resistance earlier this year.

The collar trade accounted for almost half the total option volume in MRO in yesterday's 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: MRO

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