Stone Energy bulls chisel away

By David Russell,

Shutterstock photo

The bulls piled into Stone Energy yesterday as activity continues to mount in oil drillers and related names.

optionMONSTER's Heat Seeker monitoring system detected the purchase of more than 2,700 February 33 calls, eclipsing previous open interest of just 757 contracts. The first block priced for $0.25, but the strong demand quickly drove premiums up to $0.45.

These long calls lock in the price where investors can buy a stock, letting them cheaply position for a rally. This way, they stand to generate significant upside leverage while limiting the capital at risk if they're wrong about the direction. (See our Education section)

SGY rose 1.61 percent to $30.92 yesterday. It rallied more than 70 percent between July and October, then slid back near to its August highs, and has been working its way higher again this month. The stock is also near its rising 200-day moving average, which could make some chart watchers think that it's at an attractive entry level.

Total option volume was 30 times greater than average in the session. Calls outnumbering puts by a bullish 45-to-1 ratio.

Other energy names have been active as well. Traders, for example, more than tripled their money in Murphy Oil on Friday. Superior Energy, Baker Hughes, National Oilwell Varco, and Halcon Energy have also appeared on Heat Seeker recently.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: SGY

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