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Cameron trade sees earnings rally

By: optionMONSTER
Posted: 7/24/2013 1:20:00 PM
Referenced Stocks: CAM

The bulls are looking for a gusher when oil-services company Cameron reports earnings tomorrow morning.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 1,400 September 65 calls for $1.95 and the sale of an equal number of September 70 calls for $0.50. Volume was more than 50 times open interest at each strike, indicating that new positions were initiated.

Owning calls locks in a buy price on a stock, while writing calls forces the investor to sell shares if they reach a certain level. Combining the two allows the spread between the two prices.

In the case of today's transaction, the trader will collect $5 if CAM closes at or above $70 on expiration. It cost $1.45 to open the position, implying potential profit of up to 245 percent. (See our Education section for more on the strategy, known as a bullish call spread .)

CAM is down 2.19 percent to $62.97 in afternoon trading as it tries to hold support at its 50-day moving average. The stock has spent most of the year consolidating above its previous all-time highs from 2008 despite weak results recently.

Total option volume is 5 times greater than average in the session, according to the Heat Seeker. Calls outnumber puts by a bullish 6 to 1 ratio.