It is not every day we see a $10 billion company like Valero Energy (NYSE:VLO) shed 20% of its value. When it happens, it is certainly action worth investigating.

The sudden decline comes thanks to the company’s executives estimating a fifty-cent per share Q2 loss, versus $0.59 per share earlier estimates and $0.74 per share consensus projections. The jaw-dropping news sent shares of competing refiners into the dumpster as well.

Frontier Oil (NYSE:FTO) is down over 15%. CVR Energy (NYSE:CVI) is down over 17%. And Suncor (NYSE:SU) is down by 8%.

The more a company’s profits rely on refining revenues, the deeper the decline.

The day’s action has created opportunities for options investors.

Sure, things are bad at Valero, at least in the short run. But its competitors do not face such a bleak outlook.

The market makes mistakes

Valero claims its Q2 loss will be due, in part, to its temporary shutdown at its Delaware City facility as well as unfavorable margins, especially in the diesel market. There is no doubt volatile crude prices over the last six months have made managing the business extremely difficult. Margins have been anything but predictable.

Refiners must walk a thin line to reach maximum profitability. Much of their fate relies in the hands of energy traders. Creating and sustaining maximum margins takes incredible financial diligence and hedging. Get one calculation wrong and, well, just look at Valero.

But as I said, Valero’s problems are not systemic. The industry as a whole should not have dropped by such large levels today.

For options investors, it spells an opportunity to buy short-term calls. Front-month calls carry the most reward, but are the most risky.

CVR Energy’s June 7.50 calls are worth looking at. And Suncor’s June 33.00 calls are worth your time.

The best profits will come if the markets make a significant rebound off of today’s depressing action. Even if the next several weeks offer moderately bullish action, the profit potential is eye-opening.

Big, industry-wide moves like we saw today are what options investors depend on for triple-digit gains. The market does not make such big mistakes often, but when it does the profits can be spectacular.

Source: Take Advantage from the Refining Industry Fallout

Inflation, a lack of production growth, and a weaker dollar will create justification for rising prices. Frontier Oil (NYSE:FTO) is worth a look.

Oil is slowly regaining the attention of savvy investors. After dropping into profit-erasing territory just two months ago, the value of the world’s most valuable fuel source is slowly and quietly on the rise. Investors watching the action are getting in on some great trading opportunities.

Frontier Oil (NYSE:FTO), with a market cap of just under $1.5 billion, is considered a small fry in an industry dominated by behemoths. But that does not mean it does not offer a huge profit opportunity.

As inflationary fears rise, the nation’s economy returns to growth and the government does its best to bump up the price of any pollution-emitting fuel source, companies like Frontier will see their share prices grow.

Read the full article here at TFN: Frontier Oil: Buy low, sell high