Big trades light up energy sector

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Energy has been lagging, but traders are looking for upside in the sector.

optionMONSTER's Heat Seeker monitoring program has detected bullish activity in several industry leaders so far today. ConocoPhillips hit first as buyers snapped up 10,500 February 72.50 calls, mostly for $0.14 and $0.15. Exxon Mobil's February 105s followed minutes later for $0.16 and the February 50s on BP were purchased for $0.23.

Volume exceeded open interest in all three, so new money was clearly put to work in these long calls . It's especially noteworthy that they selected cheap contracts expiring next month because that means they think a rally could ensue in the near term. This way they won't miss it, but they're also risking a tiny fraction of the capital they would need to buy shares. ((See our Education section)

COP is down 0.22 percent to $67.93 in afternoon trading. XOM is off 0.08 percent to $98.70, and BP has slipped 0.34 percent to $47.94. The broader energy sector has struggled against the S&P 500 over the last year amid high inventories and as Chinese growth remains lackluster.

But yesterday the World Bank raised its forecast for the global economy and stockpiles fell sharply. That drove up crude oil, and today's option activity reflects a belief energy stocks will return to favor.

The Heat Seeker also picked up unusual bullish activity in smaller companies including PetroQuest Energy and Halcon Resources .



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

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


This article appears in: Investing , Options

Referenced Stocks: COP

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