Why puts are bullish in Interoil

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Interoil is rallying, and traders are using puts to ride the rally.

optionMONSTER's Depth Charge monitoring program detected the sale of 4,500 December 77.50 puts for $5.15 and the purchase of an equal number of December 62.50 puts for $1.12. Equal-sized blocks traded at the same time in the November 70 puts and the November 55s for $0.18 and $0.05 respectively, but volume was below open interest in those.

It appears that the investor had previously sold a November 70/55 put credit spread, looking for the energy driller to remain above $70 through expiration later this week. IOC rallied 20 percent to $80.18 yesterday after quarterly revenue beat expectations, and the trader rolled the position up to the December 77.50/62.50 spread.

The adjustment collects an additional $3.90 and keeps him or her in the trade for an additional month. It also raised the bottom of the expected range from $70 to $77.50. Put credit spreads let investors collect money if a certain price level is held. (See our Education section for other market-neutral strategies.)

Total option volume was 12 times greater than average in IOC during yesterday's session.



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: IOC

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