How big trader is playing Cameron

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Someone is using options to spice up a slow rally in Cameron International.

Our Heat Seeker trade scanner detected the purchase of 9,150 November 50 calls for $15.10 and the sale of an equal number of May 45 calls for $18.60. Volume was below open interest in the nearer-dated contracts, indicating that an existing position was rolled forward in time and upward in strike.

Both calls are deep in the money , so the investor is using them as a replacement for shares in the oil-servicing company. The strategy lets him or her risk less about a quarter of the stock price while still providing upside exposure on an almost dollar-for-dollar basis. (See our Education section)

CAM rose fractionally to $63.46 yesterday and is up 35 percent in the last year. It's outperformed the broader energy sector for most of that time but has lagged since mid-February.

If the position hadn't been adjusted yesterday, the trader would be at risk of getting assigned shares on Friday. The strategy also yielded a credit of $3.50.

Total option volume was 21 times greater than average in the name, with calls outnumbering puts by 34 to 1.



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: CAM

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