A huge three-way spread dominated option trading in Weatherford International as shares rebounded yesterday.
optionMONSTER systems show that a trader bought 19,322 April 14 calls for the ask price of $0.56 against previous open interest of more than 55,000 contracts. At the same time, he or she sold 19,322 April 16 calls for the bid price of $0.15 and the same amount of the April 11 puts for $0.22. The volume at those two strikes was more than open interest, indicating new positions.
The overall strategy will profit if WFT runs to or above $16. The trader paid only $0.19 for that chance but risks having to buy shares if they are below $11. (See our Education section)
Weatherford, which provides equipment and services to energy drillers, finished yesterday up 1.97 percent to $12.91. It was testing resistance around $13.50 going into the first week of the month. Shares were last above $16 in May before gapping down.
More than 68,000 WFT options changed hands yesterday, compared to a daily average of 17,500. Almost all of the action was in the three-way combination.
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