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Options Action: BP

BP ended sharply higher Tuesday as investors grew more confident that a relief well will be completed on or ahead of schedule and it will bring an end go BP's woes.

But does the renewed interest from the Street mean you should establish a long position in the stock?



Not necessarily.

Scott Nations, president of NationShares suggests a stock replacement strategy, instead. It follows:

Buy Aug 40 calls at $0.50.

By trading options insteading of owning the stock outright you can limit your exposure to losses - in this case $0.50 a share.

And by purchasing the calls, you have the right (but not the obligation) to call away shares of BP at $40 before the third Friday in August.

Presumably, by that time, you'd be able to sell them into the market at a profit.

Learn more about this trade. Watch the video now!


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Trader disclosure: On July 6, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Pete Najarian Owns (CRUS) Call Spreads; Pete Najarian owns (AKAM) call spreads; Pete Najarian owns (GNW); Seymour owns (AAPL), (BAC), (GOOG), (INTC), (POT); Kelly owns (BP) puts; Kelly owns (FCX) puts; Kelly owns (GLD); Kelly owns (GDXJ); Kelly is short (GS); Terranova owns (MON), (AGU), (KO), (XOM), (TEVA), (RDS.A), (GMCR), (UPL), (GS); Terranova owns (GLD) July 123 puts; Terranova owns (GS) JULY 130 CALLS; Terranova owns (GS) JULY 135 CALLS; Terranova is short gold

For Tim Seymour:
Seygem Owns (WBD)

For JoeTerranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)

For Anthony Scaramucci
Scaramucci and SkyBridge Capital own (BAC)
Scaramucci and SkyBridge Capital own (BP)
Scaramucci and SkyBridge Capital own (C)
Scaramucci and SkyBridge Capital own (GOOG)
Scaramucci and SkyBridge Capital own (GS)

For Brian Kelly
Accounts managed by Kanundrum Capital own (AUY)
Accounts managed by Kanundrum Capital own (GFI)
Accounts managed by Kanundrum Capital own Gold
Accounts managed by Kanundrum Capital own Treasuries
Accounts managed by Kanundrum Capital own US Dollars
Accounts managed by Kanundrum Capital is short (AMZN)
Accounts managed by Kanundrum Capital is short (RCL)
Accounts managed by Kanundrum Capital is short (XLY)
Accounts managed by Kanundrum Capital is short (XLE)
Accounts managed by Kanundrum Capital is short (AFL)
Accounts managed by Kanundrum Capital is short (CME)
Accounts managed by Kanundrum Capital is short (EWI)
Accounts managed by Kanundrum Capital is short (EWO)
Accounts managed by Kanundrum Capital is short (GS)
Accounts managed by Kanundrum Capital is short (HIG)
Accounts managed by Kanundrum Capital is short (RKH)
Accounts managed by Kanundrum Capital is short (XLF)
Accounts managed by Kanundrum Capital is short (XLI)
Accounts managed by Kanundrum Capital is short (FCX
Accounts managed by Kanundrum Capital is short (GFI)
Accounts managed by Kanundrum Capital is short (JOYG)
Accounts managed by Kanundrum Capital is short (XLB)
Accounts managed by Kanundrum Capital is short (XLK)
Accounts managed by Kanundrum Capital is short (V)
Accounts managed by Kanundrum Capital is short (PCAR)
Accounts managed by Kanundrum Capital is short (COF)
Accounts managed by Kanundrum Capital is short (KMX)

Deborah Weinswig
Employees Of Citi Own (WMT), (JCP)
An Employee Of Citigroup Global Markets Or Affiliates Is A Trustee Of (TGT) Citigroup Global Markets Or Affiliates Owns 1% Or More Of (SKS) Citigroup Global Markets Or Affiliates Has Managed Or Co-Managed An Offering Of (DG), (KR), (WMT) In Past 12 Months Citigroup Global Markets Or Affiliates Has Received Investment Banking Compensation For Services Provided In Past 12 Months From (DG), (KR), (SKS), (SVU), (TGT), (WMT) Citigroup Global Markets Or Affiliates Expects To Receive/Seek Investment Banking Compensation From (WMT) In Next 3 Months Citigroup Global Markets Or Affiliate Received Non-Investment Banking Compensation From (HD), (JCP), (KSS), (KR), (M), (SWY), (SVU), (TGT), (WAG), (WMT), (COST) In Past 12 Months (DG), (KR), (SKS), (SVU), (TGT), (WMT) Are Or In Past 12 Months Were Investment Banking Clients Of Citigroup Global Markets (CVS), (DG), (HD), (JCP), (KSS), (KR), (M), (SWY), (SKS), (SVU), (TGT), (WAG), (WMT), (COST) Are Or In Past 12 Months Were Clients Of Citigroup Global Markets (Non-Investment Banking, Securities-Related Services) (HD), (JCP), (KSS), (KR), (M), (SWY), (SVU), (TGT), (WAG), (WMT), (COST) Are Or In Past 12 Months Were Clients Of Citigroup Global Markets (Non-Investment Banking, Non-Securities Related) Citigroup Global Markets Or Affiliate Received Compensation From (DG) In Past 12 Months Citigroup Global Markets Is A Market Maker In (CVS), (M), (COST) Citigroup Global Markets And/Or Affiliates Has A Significant Financial Interest In Relation To (HD), (JCP), (KR), (LOW), (M), (JWN), (SWY), (SVU), (TGT), (WMT), (COST) Citigroup Global Markets Or Affiliates Owns 5% Or More Of (SKS)

Doug Kass
**No Disclosures**

Mark Zandi

**No Disclosures**

David Riedel
**No Disclosures**

Scott Nations
**No Disclosures**

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