Big Trader Bets on BP

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As stocks surge, traders are springing for calls. And one name seeing heavy call volume is oil and gas giant BP.

Friday's better-than-expected jobs report has sent global markets soaring on optimism about the U.S. economy. This optimism has flowed into the options market, where we are seeing lots of upside-call buying. So far the biggest trade of the day has been the purchase of 19,500 BP July 45-strike calls for $0.71 each. Done with the stock at $44.22, this trade will profit if BP is above $45.71, or some 3 percent higher, by July expiration.

It has been three years since BP's disastrous oil spill in the Gulf of Mexico, and the stock still hasn't fully recovered. However, on Tuesday, BP increased its dividend, which puts the stock's annualized yield at about 5.2 percent. With baby boomers looking for yield as they enter retirement, blue-chip stocks like these are likely to see continued buying for their higher-than-average yields. At current prices, BP looks like a safe buy, considering it is trading at a 6.20 trailing price-to-earnings ratio, and a forward price-to-earnings ratio of 8.9, which is much lower than that of many comparable blue chips offering this high of a yield.

In the nearer term, BP could see growth from a deal it is working on to export natural gas from the Shah Deniz gas field in Azerbaijan to Europe. On Thursday, BP announced it is exploring binding transportation offers from two competing pipeline consortia, and a final decision is expected late in 2013.

Such a deal would diversify Europe's gas supplies and reduce dependence on Russia. The concern for BP will be any slump in crude prices, which would hurt profitability. Therefore, buying calls instead of stock allows you to keep risk limited into the historically volatile summer months. If crude sells off and drags BP down with it, then only the option premium bought will be lost, and BP shares can be purchased for a better price. If BP instead rallies, these calls allow you to lock in a cost basis of $46.71, and will turn into stock at July expiration.

I have no position in BP currently, but as I look for energy exposure, I might consider using the cash I raised by closing my positions in the refiners like Marathon Petroleum and putting it into BP.

Disclosures: None to report.

Brian Stutland is managing member of Stutland Equities and a contributor to CNBC's "Options Action." Follow him on Twitter: @BrianStutland