U.S. Markets closed

Can anything stop Advantage Oil?

David Russell (david.russell@optionmonster.com)

Energy is the dominant theme in the market this month, and one investor is looking for more upside in Advantage Oil.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 3,300 May 5 calls for $1.25 and the sale of an equal number of August 6 calls for $0.45 today. Volume was below open interest in the May contracts, which suggests that an existing short position was rolled forward in time.

The investor almost certainly owns shares in the Calgary-based driller and is using the options as part of a covered-call strategy . Adjusting the trade cost $0.80 but lets the trader collect an additional $1 on the stock. (See our Education section)

AAV is up 4.27 percent to $6.35 in afternoon trading and is up 45 percent so far this year. We cited opportunities in the April 5 and May 5 calls a month ago , which quickly tripled as money poured into the energy space.

Today's investor is using an in-the-money strike , so he or she is more interested in earning income in the trade than making huge profits from a rally. Their decision reflects confidence that there is little downside risk in the name.

Total option volume is 25 times greater than average in the name so far today, with calls outnumbering puts by 21 to 1.

More From optionMONSTER