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Refiner bulls turning to HollyFrontier

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders are turning bullish on HollyFrontier as oil refiners continue their recent comeback.

More than 5,700 November 48 calls were purchased on Friday, with large blocks snapped up initially for $0.35 and then for $0.45, according to optionMONSTER's Heat Seeker tracking system. This is clearly fresh buying, as open interest in the strike was a mere 185 contracts before the trades appeared.

These long calls lock in the price where a stock can be purchased for the next month no matter how far it might rise. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $48 through mid-November. (See our Education section)

HFC rose 1.63 percent to $44.92 on Friday, one session after breaking above its 50- and 100-day moving averages. Total option volume in the name was triple its daily average for the last month, with overall calls outpacing puts by a bullish 12-to-ratio.

The company is scheduled to release third-quarter results on Nov. 6 before the opening bell. Other refiners that have seen upside action this month include Valero Energy, Tesoro, and Phillips 66.

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

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