An unusual bullish trade appeared in Ultra Petroleum yesterday
before this morning's quarterly report.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of some 4,700 November 19 calls for $0.45 and the sale of
a matching number of December 17 puts for $0.40. Volume was more
than triple open interest at both strikes, indicating that new
positions were initiated.
locks in the price where the stock can be bought, while
forces the investor to buy shares if shares drop. Combining the two
strategies is highly bullish, using the money from the puts to
offset the cost of the upside bet. That lowered the cost to just
The transaction was unusual because it used different expiration
months. As a result, the trader is on the hook to buy UPL for $17
over the next seven weeks but only has the right to make money from
a rally through Nov. 15. However, the break-even level of $19.05 is
closer than the $17.05 price where he or she faces additional
losses. (See our
section for more on how to time fluctuation with options.)
UPL declined 1.29 percent to $18.36 yesterday and is down 15
percent in the last three months. The oil and gas company is now
trying to hold support around the same $18 level where it traded in
January and bounced in April, which could make some chart watchers
think that support is in place.
Total option volume was 5 times greater than average in the
session, according to the Heat Seeker.
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.
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