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Energy gusher continues in Tesoro

Pete Najarian (ask-pete@optionmonster.com)

Tesoro lit up our scanners yesterday as energy names continued to draw aggressively bullish option action.

Last Thursday the oil refiner saw buying in the November 49 calls for $1.12, and now that winning trade is being rolled forward after the stock has surged. optionMONSTER's Heat Seeker system shows that a trader sold 7,500 contracts for $2.95 and bought 8,545 December 55 calls for $1.60.

Long calls lock in the price where the stock can be purchased, letting investors benefit from a rally for just a fraction of the cost of the shares. These options can also generate significant leverage, which is exactly what occurred as those November calls more than doubled in less than a week. Yesterday's roll keeps the investor in the trade for another month, so he or she is definitely looking for more gains. (See our Education section)

TSO rose 1.16 percent to $49.52 yesterday and has been running along with peers such as Valero Energy and HollyFrontier. Option activity has been leading the move and accelerated throughout October.

More than 30,000 contracts traded in the Tesoro, compared with fewer than 13,000 in a typical session. More than 27,000 of those were calls versus less than 2,700 puts.

Disclosure: I own TSO calls.

(A version of this post appeared on InsideOptions Pro yesterday.)

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