BP – BP Plc – One investor appears to be taking advantage of today’s broad shunt lower for the market to take a bullish stance on shares of recovering oil-giant, BP. Its shares are lower by 3.4% to $38.73, which has allowed this option strategist to hone in on call options expiring in January 2012. Using a bullish spread combination the investor has lowered the cost of exposure to the stock should the Gulf of Mexico spill become a distant memory throughout 2011. The investor paid $3.10 to acquire 1,900 calls at the $50.00 strike and partially reduced the layout by selling the same amount at the $55.00 strike for a premium of $1.95, leaving a net payable premium of $1.15 and well below half the outright cost of the lengthy lower strike calls. Should BP’s share price completely recover its losses, this investor is looking to take a 10% share price increase on board through this limited-gain strategy. A rise of 8.9% in the reading of option implied volatility comes ahead of a tropical storm that has caused engineers to temporarily pack-up their drilling equipment before attempting to completely seal off the Macondo Well.
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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