Noble Energy has been ripping higher, and one investor is using
a low-risk strategy to eke out a few dollars of profit.
optionMONSTER's tracking systems detected the purchase of about
4,060 February 70 calls for $16 against open interest of 4,229
contracts. An equal number of May 75 calls was sold at the same
time and for $12.90 against open interest of just 51 contracts.
The trade was probably the work of a shareholder who rolled a short
position in the calls to the higher strike. That would earn an
additional $5 on NBL stock in return for paying $3.10 now and
agreeing to hold the position for an additional three months.
While it may seem strange to implement the trade with so much time
remaining until February expiration, the investor may have wanted
to act now because the bid/ask spreads on the calls will widen
further as NBL climbs, increasing the cost of the trade.
The natural-gas stock rose 2.23 percent to $85.16 yesterday and is
up 12 percent in the last month. The $80 level had provided
resistance for most of the year, so now investors may expect it to
provide support if the shares pull back.
That also would also bolster the case for the trade, which makes
its maximum profit if NBL stays above $75 through May expiration.
The strategy is similar to another transaction in Rayonier
yesterday that used the time value in options to create a position
similar to a fixed-income investment. (See our Education section)
Overall option volume in the stock was 11 times greater than
average in the session, with calls outnumbering puts by 15 to
(Chart courtesy of tradeMONSTER)
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