The energy sector has been incredibly active among option
traders, and the bulls turned to Magnum Hunter Resources on Friday.
optionMONSTER's Heat Seeker scanners detected heavy call volume in
the Houston-based oil driller. The paper hit early and hard.
Buyers initially snapped up the October 7 calls for as little as
$0.15. Most of the large blocks followed at $0.20, and then the
action really heated up as traders bought the October 6s for $0.85
and the November 7.50 calls for $0.30.
lock in the price where shares can be purchased, so investors use
them to avoid missing a rally. The options can also generate
extreme leverage on a percentage basis because they cost so little
compared with the stock itself. (See our
And that's exactly what happened Friday because MHR continued to
advance and closed the session up 6.99 percent to $7.04. The
October 7s more than doubled to $0.45, while the Novembers
appreciated 50 percent and the October 6s gained about 20 percent.
Total option volume was 9 times greater than average in MHR, with
calls outnumbering puts by an extremely bullish 17-to-1 ratio.
Other energy names to draw upside action included Baker Hughes,
Energy Transfer, Markwest Energy, and Valero.
(Russell has no positions in MHR.)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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