Oil Refiners Head North as Options Trading Picks Up

• By the tickerspy.com Staff
• On 12:06 pm EDT, Friday September 18, 2009

Refiners were mixed on Friday, but options action suggests the sector is one of the hottest on Wall Street.

Interoil (NYSE: IOC - News) shares are soaring by over 10% today after Morgan Stanley initiated coverage on the stock with an Overweight rating and a hefty $65 price target. The analyst said, "IOC appears to be better positioned for success than at any time in its 15-year history," during which shares have broken above the $40 mark only twice. The stock has more than tripled since hitting an all-time low of less than $10 in November of 2008.

CNBC's Joe Terranova is bullish on the refinery sector as a whole, suggesting that it "may just be the best energy play" through the end of the year. "These stocks were priced for Armageddon and the trade was unwound" explained Terranova.

Fellow CNBC commentator and co-founder of OptionsMonster Pete Najarian noted today's "unusual options action" in Frontier Oil (NYSE: FTO - News) and Western Refining (NYSE: WNR - News). Frontier is trading lower by -2.5% while Western Refining moves ahead by a similar margin.

The Wall Street Journal also noted a spike in options trading among refiners Frontier, Sunoco (NYSE: SUN - News) and Valero (NSYE: VL0), with a bias towards October calls.

All of the aforementioned stocks are up by more than 5% over the last week, as are Alon USA Energy (NYSE: ALJ - News), Holly Corp (NYSE: HOC - News), and CVR Energy (NYSE: CVI - News).

As traders flock to refiners, investors can track the sector's performance with the Oil Refiner Stocks Index. As of this writing, the Index is one of the top-10 performers over the last week.

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