Conoco Phillips (COP, news, chart, volatility) appears to have been the subject of a substantial collar strategy Tuesday. Shares gained $3.94 to $73.25 after crude oil rose 5 percent and reclaimed $100 a barrel. The top two trades in COP options included 7,500 of the January 2010 puts with the 50 strike and 7,500 of the January 2010 calls with the 120 strike price. While the calls traded bidside for $2.00, the puts hit on the offer for $3.65. Both traded on the AMEX at 15:11.

Within minutes of the options trades, a block of almost 200,000 COP shares traded at $72.85 on the PHLX. Taken together, the action appears to be part of a substantial collar. If so, the strategist owns shares, bought the 50 puts for downside protection, and sold calls to help finance the purchase of the puts. The cost basis for the stock is $74.50 (stock price + put – call), with the put keeping a floor under possible losses below $50 (32.9 percent) and upside profit potential to the strike price of the call, or $120.00 a share (61 percent).