Traders turned bullish on Tesoro late yesterday, continuing a
string of positive option activity in the refiners.
A flurry of call buying hit the name with less than 15 minutes
remaining in the session. Traders first snapped up 8,000 February
50 calls for $1.88, followed by almost 35,000 February 60s for
$0.40. Volume was more than 20 times the previous open interest at
each strike, indicating that new positions were initiated.
"Unreal and far upside," optionMONSTER co-founder Pete Najarian
declared in our subscribers' chat room after spotting the trade. It
was one of the several energy-related stocks he has cited in recent
sessions. Others, including Newfield Exploration and Whiting
Petroleum, racked up big profits in recent sessions.
lock in the price where shares can be bought, so they can move a
lot more than the stock on a percentage basis and produce
significant leverage. It's interesting to see the activity after
occurred in other refiners, such as Phillips 66 and Marathon
On Sept. 30, the PSX May 57.50s were sold for $5.85 and MPC's April
62.50s were sold for about $5.95. Those investors were anticipating
little downside in both names and were willing to backstop other
traders for losses below the strike prices. (See our
section for more on
TSO rose 1.08 percent to $43.79 yesterday. It tripled between June
2012 and last May but has been skidding lower since. The stock has
followed the fortunes of other refiners in recent months as price
convergence between West Texas Intermediate and Brent crude oils
hurt margins. The recent options action suggests that investors
think they're ready to start rallying again.
Almost 44,600 contracts traded in TSO yesterday, 11 times its daily
average for the last month. Overall calls in the name accounted for
a bullish 87 percent of the total.
(A version of this post appeared on
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