Huge profits in oil refiner space

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Oil refiners are ripping higher again today, and traders are cleaning up left and right in the space.

optionMONSTER's Heat Seeker scanning program has been flagging the group steadily over the last month, and it was also highlighted in a special report in our Market Action webinar on Oct. 4. The thesis was simple: A widening spread between American West Texas Intermediate crude and European Brent crude would expand profits for the industry. And that's exactly what happened.

Take Tesoro . Buyers started gobbling up the February 60 calls for $0.49 early last month with the stock near a 52-week low. They returned for the December 55s at $1.45 three weeks later and then the May 60s for $3.90 in mid-November. The February contracts are up more than 600 percent to $3.85, the Decembers almost tripled to $4.55, and the May calls are up almost 50 percent.

Valero Energy was the other big winner. It initially appeared on Heat Seeker just one day after TSO with buying in the December 39 calls. The March 38s hit the following week and then the March 40s near the end of last month. Those December 39s have appreciated a stunning 1,600 percent, while the March 38s have tripled and March 40s have more than doubled.

TSO rose 3.37 percent to $58.88 in afternoon trading and VLO is climbing 3.70 percent to $45.99. Both are up more than 30 percent since the beginning of October, well above the S&P 500's 7 percent gain over the same period.

Even more remarkable is the strength in refiners given the weakness in the broader energy sector. (See our researchLAB market scanner to drill down into the SPDR Select Sector Energy fund over different time periods. Its four best-performing members in the last month are refiners, led by TSO.)



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: TSO

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