CNQ – Canadian Natural Resources, Ltd. – The Canada-based independent energy company received a long-term vote of confidence by one options investor positioning for a significant rally in the price of the underlying stock by December expiration. CNQ’s shares are trading 2.45% higher to stand at $37.02 as of 12:10 pm (ET) after previously rallying 3.00% to secure an intraday high of $37.22 in the first half of the session. It looks like the bullish options player sold nearer-term July contract put options in order to partially finance the purchase of a debit call spread in the December contract. The investor sold 2,000 puts at the July $34 strike to receive an average premium of $0.60 apiece. The trader keeps the full amount of premium on the put sale as long as CNQ’s share price exceeds $34.00 through July expiration. Next the options optimist purchased 2,000 calls at the December $42.5 strike for a premium of $1.95 apiece, and sold the same number of calls at the higher December $47.5 strike for $0.75 in premium per contract. The net cost of the spread, including the additional financing provided by the put sale in the July contract, amounts to $0.60 per contract. Therefore, the combo-trader makes money as long as shares of the underlying stock rally more than 16.4% to surpass the effective breakeven price of $43.10 by December expiration. Maximum available profits of $4.40 per contract pad the investor’s wallet if, by expiration, Canadian Natural Resources’ shares are trading 28.3% higher than the current price of $37.02 to exceed $47.50 by expiration day in December.
Affiliation: Interactive Brokers
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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