Trader sees treasure in Tesoro


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Tesoro means "treasure" in Spanish, and one bull is looking to cash in.

optionMONSTER's Heat Seeker tracking system detected the purchase of about 4,000 December 16 calls for $0.58 and the sale of a matching number of December 18 calls for $0.08, resulting in a cost of approximately $0.50. Volume was more than 3 times open interest in both strikes.

TSO TSO is up 3.69 percent to $15.74 in afternoon trading and is up 38 percent in the last three months. The oil refiner has been charging higher along with other companies in the sector as margins improve and demand rebounds along with the stronger economy.

The shares have been rallying since bottoming around $11 in late August and now appear to have broken resistance at $15, where they peaked in January. Today's option trader is positioning for them to run back toward the $18 level where TSO traded in May 2009.

If that happens, he or she will earn about 300 percent. The strategy, known as a bullish call spread, uses the premium from selling higher strike calls to reduce the price of owning the lower strikes.

The trade offers the benefit of increasing leverage, but also limits gains if the stock continues past $18. See our Education Section for more.

Overall option volume in TSO is 11 times greater than average so far today, with calls accounting for 90 percent of the activity, according to Heat Seeker.

(Chart courtesy of tradeMONSTER)

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

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