Tesoro refines millions of gallons of oil everyday, but one
investor thinks that it's running out of gas.
optionMONSTER's Depth Charge tracking system detected the purchase
of about 5,000 December 17 puts for about $0.36. Around the same
time about 3,000 December 17 calls were sold for $0.51. The trade
pushed total option volume in the high-flying energy stock to 8
times greater than average.
The resulting position resembles a short sale on the stock, which
has surged 33 percent since the beginning of November. It cost
about $27,000 to implement, or $0.05 per put contract owned, and
will deliver significant leverage on a drop below $16.95.
If done naked, the trade would lose money should TSO continue to
rally. However, it was probably the work of an investor who owns
the stock and wanted to hedge against a pullback. That way, he or
she can simply sell the shares for $17 to cover the short calls.
(Such a strategy would be a variation of a collar.)
TSO has been climbing amid heavy option action along with other
refiners as the economy improves, demand climbs, and margins widen.
Others such as Western Refining and Valero Energy have also enjoyed
(Chart courtesy of tradeMONSTER)
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