Phillips 66 is regular target for bulls

By David Russell,

Shutterstock photo

Oil refiner Phillips 66 hasn't been around for long, but the bulls are already smitten.

Our tracking systems detected the purchase of 2,500 January 45 calls yesterday for $1.05 against open interest of just 157 contracts. Later in the session, a staggering 25,000 January 49s were traded for $0.55 and $0.60 as the buying continued.

Calls lock in the price investors must pay to own a stock. They can generate major leverage if it moves in the correct direction but also run the risk of expiring worthless if no rally occurs.

Long-dated contracts such as the January PSX calls are especially interesting because they grant exposure over several months, eliminating the difficulty of purchasing several million shares. (See our Education section)

PSX was down when the calls changed hands but rebounded and finished the session up 0.96 percent at $40.15. The January 45s appreciated more than 20 percent to $1.30 by the close.

The company was spun off from ConocoPhillips only in April. Some investors tripled their money in the name last month using August contracts.

Overall option volume in the name was 9 times greater than average yesterday, with calls outnumbering puts by 66 to 1.

(A version of this post appeared on InsideOptions Pro yesterday.)

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

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

This article appears in: Investing Options
Referenced Stocks: PSX

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