One investor is using options to manage risk in Approach Resources, which is up 67 percent in the last three months.
optionMONSTER's systems show that a block of 3,200 April 35 calls was sold in the Texas-based shale-energy company for an average premium of $3.17. An equal number of January 30 calls were bought at the same time for $3.08. Volume was below open interest in January but not April, which suggests that a short position was rolled from one strike to the other.
The investor probably owns AREX stock and has been using the options as part of a covered call strategy, which reduces the cost of the trade but also limits its gains. By adjusting the position yesterday, he or she generated $0.09 of income and now stands to make an additional $5 on the long stock. The trader also received a credit when the calls were first sold, which would have reduced the cost of the shares.
AREX closed at $31.28 yesterday, up 7.79 percent. Shale-energy names have been one of the strongest groups this year as new drilling technologies allow exploitation of cheap deposits that had been previously inaccessible. (See researchLAB for more)
Overall option volume in AREX was 7 times greater than average in yesterday's session, according to the Heat Seeker, with calls outnumbering puts by 76 to 1.
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