Option Bulls Find Love in Phillips 66
Oil refiner Phillips 66 hasn’t been around for long, but the bulls are already smitten.
OptionMonster’s tracking systems detected the purchase of 2,500 January 45 calls yesterday for $1.05 against open interest of just 157 contracts. Later in the session, a staggering 25,000 January 49s were traded for $0.55 and $0.60 as the buying continued.
Calls(explain this) lock in the price investors must pay to own a stock. They can generate major leverage if it moves in the correct direction, but also run the risk of expiring worthless if no rally occurs.
Long-dated contracts such as the January Phillips 66 calls are especially interesting because they grant exposure over several months, eliminating the difficulty of purchasing several million shares.
Phillips 66 was down when the calls changed hands, but rebounded and finished the session up 0.96 percent at $40.15. The January 45s appreciated more than 20 percent to $1.30 by the close.
The company was spun off from ConocoPhillips only in April. Some investors tripled their money in the name last month using August contracts last month.
Overall option volume in the name was nine times greater than average yesterday, with calls outnumbering puts(explain this) by 66 to 1.
—By CNBC Contributor David Russell
Additional News: Buffett’s Berkshire Hathaway Bought Shares of Phillips 66
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David Russell is a reporter and writer for OptionMonster. Russell has no positions in PSX.