Buyers hunt for New Year bargains

By
A A A

Traders are bottom-fishing as the year ends, looking for certain stocks to rebound in early 2014.

It began with Westport Innovations, a maker of natural-gas engine parts that's been sliding since August and is now near 52-week lows. optionMONSTER's Heat Seeker monitoring system detected heavy volume in the January 19 calls, with buyers paying $0.30 almost 2,500 times within an hour of the opening bell.

Not much later, energy driller Rowan saw unusual activity in its January 36 calls. A quick flurry of trades crossed for $0.20, and those contracts would more than double to $0.45 by the afternoon--a testament to the kind of fast money that can be generated with options.

Long calls lock in the level where a stock can be purchased no matter how far it might climb, so even modest fluctuations in the underlying share price can produce huge swings in the options. But if the shares don't rise far enough, these options can expire worthless. (See our Education section)

WPRT fell 0.39 percent to $17.68, and RDC dropped 2.52 percent to $32.94. WPRT came into the session down 22 percent in the last month, while RDC lost 10 percent in that period.

Less than 20 minutes after the Rowan trade, traders piled into fellow energy-drilling stock Diamond Offshore. This time, more than 10,000 January 59 calls were purchased against in volume that dwarfed the previous open interest of just 166 contracts--clearly showing that this is fresh buying--as premiums ranged from $0.26 to $0.50. DO fell 0.52 percent to $55.62 and is down 9 percent in the last month.

Total option volume was 76 times greater than average in Rowan and 21 times above typical levels in Diamond. Westport's turnover was less than twice its daily average.

(A version of this post appeared on InsideOptions Pro yesterday.)



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: WPRT

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

Stocks

Referenced

Most Active by Volume

36,586,989
  • $41.35 ▼ 2.29%
33,435,019
  • $42.20 ▼ 10.86%
31,919,424
  • $9.72 ▼ 8.30%
30,045,396
  • $26.49 ▼ 1.41%
29,014,873
  • $8.05 ▼ 8%
27,308,018
  • $14.66 ▼ 8.32%
23,704,242
  • $118.93 ▼ 0.06%
23,514,654
  • $17.04 ▼ 0.41%
As of 11/28/2014, 01:06 PM

Find a Credit Card

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