How trader is handling Occidental


Occidental Petroleum has struggled, but one investor is giving it a chance.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,700 January 2015 90 calls for $6.89 and the sale of an equal number of January 2015 100 calls for $3.20, resulting in a cost of $3.69. Volume was below previous open interest at the higher strike, so there are two possible explanations for the trade.

One is that both halves were opened, in which case it is a vertical call spread with the ability to earn 171 percent if the stock closes at $100 or higher on expiration. That's less than $1 above its 52-week high.

Alternatively, the trader may have owned the 100s and saw the investment wane in value after a drop in the share price since late November. So a long-call position could have been rolled to the lower strike, raising the delta and ability to profit from a rebound. (See our Education section)

OXY rose 1.1 percent to $90.96 yesterday and is down 7 percent in the last three months. The broader sector, as measured by the SPDR Energy Select Sector ETF, was little-changed in the same period.

Overall option volume was almost 5 times greater than average on Wednesday, according to the Heat Seeker. Calls accounted for a bullish 82 percent of the total.

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