Markets

Southwestern Energy expected to rally

The bulls are betting that Southwestern Energy is ready to bounce.

optionMONSTER's Heat Seeker tracking program detected the purchase of more than 4,000 January 35 calls for $0.70 and the sale of an equal number of January 39 calls for $0.15. Volume was more than twice open interest in both strikes.

Known as a bullish call spread , the trade resulted in a cost of $0.55 and will earn a maximum profit of 627 percent if the Houston-based natural-gas driller closes at or above $39 on expiration. (See our Education section)

SWN fell 2.48 percent to $32.66 yesterday and has lost 15 percent of its value in the last month. It's been languishing along with the broader energy sector, which has significantly underperformed the S&P 500 in the same period. The stock is attempting to make a higher low than the level where it bounced in October, which could be leading some traders to believe that it's bottoming out.

There was also heavy selling in the January 30 puts for $0.54 at about the same time that the calls traded. It's not clear whether it was the work of the same investor. If it was, it would be even more bullish.

Overall option volume in SWN was 10 times greater than average in yesterday's session, according to the Heat Seeker.

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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