Tesoro bulls looking for blastoff

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Tesoro has been lining up for a rally, and now the bulls are betting that the stock will take off this summer.

optionMONSTER's Heat Seeker monitoring program detected the purchase of almost 20,000 August 62.50 calls for $2.27 and the sale of 13,700 November 57.50 calls for $6.30. Volume was below previous open interest in the longer-dated contracts, which suggests that an existing position was closed and rolled closer in time.

The adjustment is highly unusual because the trader shortened the time horizon of the long calls while moving to a higher strike. He or she also increased the number of contracts to maintain a delta of roughly 880,000 and recovered $4 million of capital. That reflects a belief the oil refiner will rally sooner rather than later. If it doesn't, the new out-of-the-money position will become worthless. (See our Education section for more on how time decay impacts option premiums.)

TSO is up 0.82 percent to $61.19 in afternoon trading. The stock rallied sharply in October and November, then pulled back and consolidated through last month. The technical picture improved when the 30- and 50-day moving averages rose through the 100-day line, and it's been climbing ever since.

Total option volume is already 10 times its full-session average, according to the Heat Seeker, with calls outnumbering puts by more than 35 to 1.

Fellow oil refiner PBF Energy was also active today as an upside position in September was rolled and upsized.




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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As of 12/18/2014, 04:15 PM


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