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
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
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
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
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