Following from OptionMONSTER (Chris McKhann) on January 25, 2013.
"A huge call spread is targeting Cobalt International Energy.
A trader bought 13,607 October 27.50 calls for the ask price of $2.65 and sold the same number of the April 25 calls for the bid price of $1.60. The volume was far above open interest of fewer than 500 contracts in each strike at the beginning of the day, indicating new positioning.
This diagonal spread, so named because it involves buying and selling options at different expiration months, would produce a maximum profit if CIE is up around $25 at the April expiration. The trade limits the downside if shares slip from there but also faces potential losses if the stock rises too far. (See our Education section)
CIE finished the session at $24.42, up 0.7 percent on the day. The offshore oil driller has been in a relatively tight range for months, though it did pop near $30 at the start of December.
More than 34,000 CIE options changed hands yesterday, compared to a daily average of 1,600 in the last month."