Thursday, August 18, 2011

Trade of the Day: Exxon Mobil January call spread risk reversal

The Trade:
A trader sold the January $65 puts to buy the $70/$80 call spread for a $0.70 debit, or $490,000.

The trader is making a large bullish bet on Exxon. XOM closed trading today at $70.94. It's interesting to note that the trader decided to use options that were in the money. The call spread without the short puts would have cost $2,891,000. By selling the short puts, the trader received a credit of $2,401,000, partially financing the expensive call spread.

The white line in the daily stock chart is the max profit of the spread. XOM traded 141,158 option contracts compared to average daily volume of 66,323. The 52-week range is a low of $58.05 and a high of $88.23.

*Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, 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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