Major bullish activity is coming across the tape today in Conoco Phillips (COP) despite coming off the highs from yesterday. Traders are betting that the generally bullish trend will continue and that this is just a pull back as they take profits and roll positions farther up. Today, we saw a trader close out of Jul 85 calls and open new long positions in Jul 90 calls. In addition to the bullish nature of rolling same-month options up to a higher strike, this trades volume far exceeded the open interest in the contract. That is, this trader opened a position that had very few previously written contracts. This coupled with the roll strategy is very bullish unusual options activity.
Moving on to the technical, we can see that the long term-trend is very bullish with the stock hitting all time highs on heavy volume and trading above the cloud. The daily chart projects this trend to continue as COP is finding strong support well above the cloud. As we analyze a shorter time interval on the chart, we can see that Conoco is definitely going through a small pullback and even showing bearish signals, but this is when we refer back to paper’s big bet on the stock rebounding and this begins to look more like a buying opportunity than a trend reversal.
The Trade
Buy COP Jul 90 Call for $0.21
Risk: $21.00 per lot
Reward: Unlimited
The Greeks
Delta: Long
Gamma: Long
Theta: Short
Vega: Long