Markets

Bulls ready to run with Marathon

Something's abuzz in Marathon Oil.

optionMONSTER's Heat Seeker tracking system detected a surge in call activity in the stock today, with activity in the December 34s, the December 35s, and the January 35s. Some 20,000 contracts traded between the three strikes in less than 10 minutes this morning--more than 4 times the average option turnover for MRO in an entire session.

Unfortunately, it's difficult to determine exactly what was going on. Volume was below open interest in the January 35 calls, so it's possible that a short position was closed in those options. Or all of the trades may have been new opening longs.

Regardless, the activity clearly looks bullish, with investors betting that MRO will break free of resistance at the $35 level that has been holding it in check ever since the market crashed in late 2008.

The stock has been grinding upward that entire time, making incrementally higher lows while tracking its 200-day moving average (purple line on chart). Some chart watchers may expect a sudden breakout or gap higher to happen soon. MRO is up 0.66 percent to $35.06 in early afternoon trading.

MRO is also attractive to value investors because it trades at lower multiples than other integrated energy companies, such as Exxon Mobil. Its enterprise value is 4.4 times EBITDA versus 7 times for XOM. Forward earnings are 8 times versus 11 times, and the price-to-book ratio is 1.06 times versus 2.5 times.

Marathon, formerly part of U.S. Steel, is also benefiting from stronger refining margins. (See this recent story for more on strength in the refining sector.)

Calls outnumber puts in MRO by a bullish 130-to-1 ratio, according to Heat Seeker.

(Chart courtesy of tradeMONSTER)

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.


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

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