Volatility sellers target CVR Energy

By David Russell,

Shutterstock photo

Refiners got massacred yesterday, and investors seized the opportunity to sell volatility on CVR Energy.

The trades, in both calls and puts, reflect a belief that yesterday's outlandish move will be followed by a period of calm rather than a quick rebound or further downside.

The December 20 calls were the busiest contract, changing hands more than 8,600 times mostly for $1.10. The December 20 puts saw volume north of 7,300 contracts and fetched $1.55 to $1.95. Activity was more than 13 times open interest in both strikes.

CVI plunged 16 percent to $18.38. The bloodbath followed a decision by transport company Enbridge to supply West Texas Intermediate crude to the Gulf Coast. That narrowed the spread versus Brent crude, which threatens profit margins across the refining sector.

Volatility spiked and boosted option premiums. Investors often respond to such events by selling calls and puts.

Almost 31,000 contracts traded overall in yesterday's session, which is about 17 times greater than average.

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: CVI

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