Monday, July 11, 2011

Trade of the Day: PetroHawk Energy January $25/$21 bull risk reversal

The Trade
A trader executed the January $25/$21 bull risk reversal 5,000x for a $0.77 debit, or $385,000.

The trader is making a large bullish bet on HK. It's interesting to note that the same trade was executed on Friday. The spread is short puts and long calls and therefore has unlimited risk to zero and unlimited profit potential. HK closed trading today at $23.38. The break even underlying price is $25.77.

The white line shown in the HK daily stock chart is the break even underlying price. You can see that the stock is currently above its 200 day moving average, but below its 50 day moving average. The trader is willing to be put the stock at $21, which is below its 200 day moving average, and close to the 50% retrace.

*Special thanks to Option Radar, BMO Capital, MEB Options, LiveVolPro, CBOE, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow!

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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