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Leverage is goal of Patterson strategy

By: optionMONSTER
Posted: 10/16/2012 11:51:00 AM
Referenced Stocks: PTEN

One investor wants leverage in Patterson-UTI Energy as the land-based drilling company works its way higher.

optionMONSTER's Heat Seeker tracking program detected the purchase of 6,000 October 17 calls for $0.40 and the sale of an equal number of November 15 puts for $0.25. Volume was more than triple open interest at both strikes, indicating that new positions were initiated.

The strategy is highly bullish toward the company, looking for a quick rally in coming days and reflecting a willingness to buy shares if they drop. Selling puts in the second expiration month let the investor collect more income to reduce the overall cost of the strategy to just $0.15. (See our Education section for more on how options can be used in lieu of buying stock.)

PTEN is up 3.07 percent to $17.44 today. It's been basing out in its current range for most of the last year after crashing from a long-term peak around $34 in mid-2011.

Sentiment has been increasingly bullish in the energy sector, which previously took a beating as the Chinese economy slowed and debt worries swept Europe. News developments recently, including this morning's German Zew survey of investor confidence, have shown gradual improvement. That's driven the euro higher, which generally goes hand-in-hand with stronger oil prices.

Overall option volume in PTEN is 11 times greater than average so far today, according to the Heat Seeker.