MarkWest Energy has been coming back to life, and one investor wants leverage to further gains.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 1,000 September 77.50 calls for $1.49, matched against the sale of 2,000 September 82.50 calls for $0.47 and 1,000 September 70 puts for $0.59. Volume was more than quadruple open interest at all three strikes, which indicates that new positions were implemented.
The investor collected a credit of about $4,000 today, and stands to collect $500,000 more if the pipeline stock is at $82.50 on expiration. He or she is effectively short above that level, so it's likely they already own at least 100,000 shares. This strategy will enhance gains on the move, but also obligate them to buy more on a drop to $70 because they sold puts. (See our Education section.)
MWE fell 1.56 percent to $74.01 in afternoon trading, and is up 17 percent in the last three months. That rally came after the stock pulled back to long-term support at $60. It's had long-term resistance around $76.
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