Option traders have discovered NuStar in a big way.
The San Antonio asphalt company had been weak for years, falling
all the way to its late-2008 lows before
suddenly lighting up
our scanners last week. Traders quickly doubled their money as the
shares rallied, and the paper has continued to flow since.
Two stocks are in play: NuStar Energy LP (NS), which terminals and
stores petroleum products, and NuStar GP Holdings (NSH), which owns
the general-partner interest in NS. Both have dividend yields over
10 percent, and they generally move together.
Activity originally occurred in the NS December 40 calls, which
shot up from $0.55 to $1.10, according to optionMONSTER's Heat
Seeker tracking system. Buyers returned on Monday as those same
contracts pulled back, snapping up another 4,900 for $0.75 to
Even more purchases
were detected yesterday for $1.05.
, traders also looked to NSH. The Heat Seeker showed more than
7,300 December 22.50 calls changing hands, most of which were
bought for $0.60.
NS ended the session up 2.65 percent to $38.71, and NSH rose 4.19
percent to $20.64. The NS December 40s, bought for $0.55 to $1.05
in the last two weeks, closed the day bid at $1.40. NSH's December
22.50 calls climbed $0.10 to $0.70.
lock in the price where shares can be purchased, letting investors
cheaply position for a rally. They can also generate huge leverage
if the stock moves in the right direction but can expire worthless
if it doesn't. (See our
Total option volume was 12 times greater than average in NS, with
calls outnumbering puts by almost 11 to 1. The activity was even
more extreme in NSH, coming in at 29 times above typical levels.
Upside contracts also outstripped the downside by an extremely
bullish 90-to-1 ratio.