Bears target Denbury as energy stalls

By David Russell,

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The energy bears are active again today, and this time Denbury Resources is in their crosshairs.

optionMONSTER's Depth Charge monitoring system detected the purchase of more than 7,000 September 15 puts for $0.40 to $0.50. All the large blocks crossed during the first three hours of trading, and volume was more than twice previous open interest.

Roughly 4,100 September 14 puts were sold for $0.10 around the same time, indicating the use of bearish put spreads . Investors paid a net cost of approximately $0.30 and will earn 233 percent if the Texas-based oil company closes at or below $14 on expiration. See our Education Section for more on how options can be used to generate leverage.

DNR fell 2.05 percent to $15.29 in afternoon trading, and is near the top of its recent trading range. The stock is also stalling around its 100-day moving average, which could make some chart watchers expect a push to the downside.

Energy stocks were extremely active in June and July as bulls returned to a sector ravaged by negativity toward the global economy. DNR was one of those, tripling the money of some investors in less than a week.

In recent sessions, however, the tone has turned more negative as traders place bearish indexed trades in the broader sector.

Overall option volume in DNR is 9 times greater than average so far today, according to Depth Charge. Puts outnumber calls by more than 80 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
Referenced Stocks: DNR

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