NXY – Nexen Inc. – The Canada-based global energy company popped up on our ‘hot by options volume’ market scanner today after one investor initiated bullish transactions on the stock in the December contract. Nexen’s shares inched up 1.35% to arrive at $21.08 by 12:45 pm ET. It looks like the investor sold 12,250 puts at the December $17.5 strike for a premium of $0.50 each in order to partially finance the purchase of 3,000 calls at the December $22.5 strike for premium of $1.05 each, as well as the purchase of 7,500 calls at the higher December $25 strike at an average premium of $0.425 apiece. The investor seems to be positioning for shares to rally significantly ahead of December expiration. Nexen’s shares must rally at least 6.7% in order for the December $22.5 strike calls to land in-the-money, whereas the December $25 strike calls require that shares rally 18.6% before they land in-the-money by December expiration. The sale of the put options indicates the options player expects Nexen’s shares to at least be trading above $17.50 through expiration day in December. The short stance in puts also implies the trader is willing to have shares of the underlying stock put to him at an effective price of $17.00 each should the put contracts land in-the-money at expiration. Nexen’s shares have traded above $17.50 since April 2009, and reached a 52-week high of $26.92 on April 23, 2010.
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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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