Bulls come back to Hercules Offshore

By David Russell,

Shutterstock photo

The bulls targeted Hercules Offshore yesterday, and they're coming back today.

optionMONSTER's Heat Seeker tracking program detected the purchase of about 3,400 May 8 calls for $0.35 o $0.40. That follows buying for $0.20 to $0.30 yesterday.

Long calls
lock in the price where investors can buy shares in the oil-service stock. Given their low price, they can generate tremendous leverage on a percentage basis if shares move in the right direction. (See our Education section.)

The strategy makes a lot of sense in the case of a stock like HERO, which is challenging a long-term resistance level in place since mid-2009. Some traders may expect a big move if it breaks out while remaining concerned about a drop. Calls provide upside exposure cheaply while limiting the amount of capital at risk in the event of a pullback.

HERO is up 1.38 percent to $7.36 in morning trading and has risen 48 percent in the last six months. Total option volume is 7 times greater than average so far today, according to Heat Seeker. Calls outnumber puts by a bullish 20-to-1 ratio.

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: HERO

More from optionMONSTER




Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com