Call Buying Surges as Sunoco Pops

| About: Sunoco LP (SUN)

By David Russell

Sunoco popped higher on a plan to spin off its coke business, and traders are positioning for further gains.

optionMONSTER's tracking systems detected heavy call buying and put selling in the refinery company, whose shares climbed as much as 8.46 percent to a 16-month high of $34.97 after the move was announced.
SUN Chart

The June 34 calls were the most active strike, and were aggressively purchased despite having only three sessions until expiration. The buying drove premiums from $0.30 to as high as $1.10. Volume surged to 1,000 against open interest of 940 contracts.

Investors also sold 664 July 34 puts, mostly for $1.15, against open interest of just 12 contracts. The trade reflects a belief that SUN has only limited downside risk.

The shares rose 6.13 percent to $34.22 in morning trading and is up 11 percent in the last month. The plan to spin off SunCoke, whose coking coal is used by steelmakers, is part of a bigger trend by the company to focus on its core refining business, which it said will make money this quarter for the first time in a year.

SUN also sold its chemicals division for $350 million in April.

Overall options volume is almost triple the average level in the name so far today.

Disclosure: No positions