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Bulls come back to Hercules Offshore

Posted
3/21/2013 10:44:00 AM
By: optionMONSTER
Referenced Stocks:HERO

The bulls targeted Hercules Offshore yesterday, and they're coming back today.

optionMONSTER's Heat Seeker tracking program detected the purchase of about 3,400 May 8 calls for $0.35 o $0.40. That follows buying for $0.20 to $0.30 yesterday.

Long calls
lock in the price where investors can buy shares in the oil-service stock. Given their low price, they can generate tremendous leverage on a percentage basis if shares move in the right direction. (See our Education section.)

The strategy makes a lot of sense in the case of a stock like HERO, which is challenging a long-term resistance level in place since mid-2009. Some traders may expect a big move if it breaks out while remaining concerned about a drop. Calls provide upside exposure cheaply while limiting the amount of capital at risk in the event of a pullback.

HERO is up 1.38 percent to $7.36 in morning trading and has risen 48 percent in the last six months. Total option volume is 7 times greater than average so far today, according to Heat Seeker. Calls outnumber puts by a bullish 20-to-1 ratio.