Baker Hughes bulls hunt for more


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Baker Hughes ripped higher at the end of last week, and the bulls are sticking around for more.

Back on Oct. 4 , our Heat Seeker monitoring system detected buying in the October 52.50 calls for $0.27. A strong earnings report Friday morning drove BHI higher by 7.28 percent to $55.55, and those calls shot up more than tenfold.

The investor sold 16,000 contracts at an average price for $3.25 and bought an equal number of November 60 calls for $0.82. The trader collected a credit of $2.43 in the process--800 percent more than his or her initial investment--and now stands to gain even more if the stock climbs further by early next year.

The company's profits totaled $0.81 a share on revenue of $5.79 billion, while analysts had expected only $0.73 and $5.77 billion respectively. It is the latest name in the energy sector to report strong results as oil and gas production surges globally. BHI is now back to levels last seen in late 2011.

Long calls lock in the price where a stock can be purchased, letting investors cheaply position for a rally. In the case of Friday's transaction, the trader needed to roll the position because the October contracts were expiring in the money at the end of the session. (See our Education section)

Total option volume in BHI was 8 times greater than average in the session, according to Heat Seeker. Overall calls outnumbered puts by 18 to 1.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

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