The bulls want to run with SM Energy.
Our tracking systems detected a giant upside trade in the wildcat
oil company, which operates in Texas, Louisiana, and the Rockies.
It entailed the purchase of 10,000 November 55 calls for $4.05,
while equal-sized blocks were sold in the November 70 calls for
$1.10 and the November 35 puts for $1.80. Volume was more than
triple open interest in all three strikes.
lock in the purchase price for a stock, while
fixes the exit level.
obligates the investor to buy shares if they fall to the strike
price or below. (See our
As a result, the investor paid $1.15 to enter the position. He or
she will collect $15 if SM rallied back to $70, representing a
profit of more than 1,200 percent. In addition to the initial
outlay, the trader also stands to lose money on the short puts if
the stock falls below $35.
SM rose 7.16 percent to $49.11 on Friday but came into the session
down by more than one-third during the preceding three months. Most
energy stocks have been hammered in that time amid worries of
financial contagion from Europe and a slow recovery in China. That
sentiment has improved markedly in the last week as investors jump
into beaten-down names in the sector.
Friday's bullish trade in SM pushed total option volume in the
stock to 24 times greater than average.
(A version of this post appeared on
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