BP – BP PLC – The 3.75% decline in the price of BP’s shares to $37.46 this morning did not deter one optimistic options player from purchasing a bull call spread in the August contract. It looks like the investor purchased 2,500 in-the-money calls at the August $35 strike for an average premium of $4.34 apiece, and sold the same number of calls at the higher August $40 strike for an average premium of $1.74 each. Net premium paid to purchase the spread amounts to $2.60 per contract. The investor responsible for the transaction makes money as long as the oil company’s shares trade above the average breakeven point on the spread at $37.60 by August expiration day. Maximum potential profits of $2.40 per contract are available to the trader if the price of the underlying stock increases 6.8% over the current price of $37.46 to exceed $40.00 at expiration.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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