What's behind call activity in Flotek

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A large call spread tops today's option action in Flotek Industries, but it doesn't look overly bullish.

FTK is up 3.29 percent to $12.38 in midday trading as it recovers much of the losses from yesterday. Shares in the mining-services company traded at $13 at the open on Tuesday, which has been resistance going back to May as shares came off the 52-week high above $14. From there they dipped below $9 before rebounding in the last three months.

More than 8,000 FTK options have traded today, compared to a daily average of just 523 contracts. The volume is almost entirely in on trade.
 
A trader bought 4,000 December 12.50 calls for the ask price of $1.30 against open interest of 7,444. Seconds later, he or she sold 4,000 March 15 calls for $0.90 against open interest of 147,  so that was a new position.

The trade could be a new opening diagonal spread, which entails buying and selling options at different expiration months to take advantage of higher premiums in the longer-dated contracts. But it looks more like a roll of short calls.

In the latter case, the trader would be buying back the December calls that are now almost in the money and selling the calls that are farther out in time and at a higher strike. This would very likely have been done against long shares as a covered call strategy. (See our Education section)

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