SNP – China Petroleum & Chemical Corp. – Shares of the largest Chinese oil and petrochemical company are up 1.20% at $89.34 in morning trading perhaps on news the company, known by the abbreviation Sinopec, purchased a 40% stake in the Brazilian unit of Spanish oil company Repsol for $7.1 billion. It looks like one investor expecting Sinopec’s shares to climb higher by January 2011 expiration is positioning for the rally by initiating a bullish risk reversal. The trader sold 2,250 puts at the January 2011 $80 strike at an average premium of $1.7750 apiece in order to buy the same number of calls at the higher January 2011 $100 strike for a premium of $1.45 each. The investor pockets a net credit of $0.325 per contract and keeps the full amount as long as SNP’s shares exceed $80.00 through expiration day next year. Additional profits start to amass should the price of the underlying shares surge 11.9% over the current price of $89.34 to trade above $100.00 ahead of expiration day in January.
GDX – Market Vectors Gold Miners Index ETF – A short strangle initiated on the gold miners fund this morning indicates one options strategist expects the price of the underlying shares to trade within a specified range through expiration in November. Shares of the GDX, an exchange-traded fund designed to replicate the performance of the NYSE Arca Gold Miners Index, are up 1.35% at $56.68 as of 11:20 am ET. The strangle player sold 4,000 puts at the November $52 strike for premium of $0.88 apiece and shed 4,000 call at the higher November $62 strike at a premium of $0.67 each. Gross premium pocketed on the transaction amounts to $1.55 per contract. The investor keeps the full amount of premium received on the strangle if GDX shares trade above $52.00 but below $62.00 through November expiration day. Short positions in both call and put options expose the investor to losses should shares of the fund rally above the upper breakeven price of $63.55, or if shares trade below the lower breakeven point at $50.45, ahead of expiration.