Someone apparently thinks that Exco Resources is ready to break
resistance and push higher.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of some 3,700 August 8 calls yesterday, most of which
priced for $0.75 and $0.80. Volume was almost triple the previous
open interest at the strike, so this is fresh buying.
lock in the price where shares can be purchased in the Dallas-based
oil company. Investors buy the options to prevent to generate
leverage, but the contracts can expire worthless without a rally.
Yesterday's calls are especially interesting because they are in
the money, making them track the stock price closely.
As a result, a move of roughly 10 percent in the shares could
double the value of the calls. (See our
section for more on the use of leverage in options.)
XCO fell 1.51 percent to $8.47 yesterday. It lost more than
two-thirds of its value in 2011 and early 2012 but has been moving
sideways since. The stock is now back around the same $8.60 level
where it peaked in May, which could make some traders expect a big
move if resistance is broken.
Total option volume was 6 times greater than average in the
session, according to the Heat Seeker. Calls outnumbered puts by
more than 4 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.
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