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Bulls scoop up Valero Energy Corp. calls

 February 16, 2011 01:45 PM
 


Valero Energy Corp. (VLO) – Traders flocked to the options playing field on Valero Energy Corp. this morning after the operator of refineries was raised to ‘Top Pick' from ‘Sector Perform' with a 12-month target share price of $35.00 at RBC Capital Markets. Shares in Valero are up 3.35% to stand at $29.40 just after 11:40am in New York. Earlier in the session the price of the underlying increased as much as 4.1% to $29.61, the highest Valero's shares have traded since October of 2008. Near- as well as long-term bulls made their mark in VLO call options in the first half of the session. Investors expecting Valero to extend gains through expiration next month scooped up more than 2,300 calls at the March $31 strike for an average premium of $0.71 apiece. Call buyers at this strike stand prepared to make money should shares in the oil refiner rally another 7.1% over today's high of $29.61 to surpass the average breakeven price of $31.71 by expiration day in March. Investors eyeing longer-term and more substantial gains in Valero's shares purchased approximately 10,200 calls out at the January 2012 $35 strike for an average premium of $1.73 a-pop, on previously existing open interest of 3,126 contracts at that strike. Traders long the calls profit in the event that VLO's shares jump 24.05% to exceed the breakeven at $36.73 within the next eleven months to expiration in 2012. Valero Energy Corp.'s shares last traded above $36.73 back in early July of 2008.

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Marvell Technology Group, Ltd. (MRVL) – Options strategists itching for a substantial near-term rally in chipmaker Marvell Technology Group are buying call spreads in the March contract this morning. Shares in the name are up slightly by 0.10% to stand at $18.80 at 10:55am, after earlier rising around 1.05% to touch an intraday high of $18.98. It looks like investor picked up approximately 6,000 calls at the March $20 strike for an average premium of $0.44 each, and sold about the same number of calls up at the March $22 strike at an average premium of $0.10 apiece. Net premium paid for the bullish spreads amount to $0.34 per contract. Thus, traders employing this strategy stand prepared to make money should Marvell's shares surge 8.2% over the current price of $18.80 to surpass the average breakeven point to the upside at $20.34 by March expiration.


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