EV Energy Partners has broken out to new highs, and one investor thinks there is still fuel in the tank.
optionMONSTER's Heat Seeker tracking system detected a surge of call activity in the oil and natural-gas exploration stock, which typically sees fewer than 600 contracts in a normal session. Yesterday, more than 8,000 changed hands, with a single large transaction accounting for the bulk of the volume.
Some 3,100 April 45 calls were sold for $2.80 against open interest and 4,216 May 50 calls were bought for $1.35. The trader apparently rolled an existing long position from one month to the next, generating a credit of about $299,000.
He or she also raised the strike price by $5, but increased the number of contracts owned. That will provide more leverage if EVEP makes an especially big move. If the stock fails to go above $50, the calls will expire worthless.
The shares rose 0.31 percent to $48.09 yesterday and are up 11 percent in the last week. They're pushing into record territory as they move above their old peak from mid-2007.
EVEP has been growing rapidly, and almost tripled its book value since the end of 2007. It also upsized a private placement of senior notes last week, which is often a sign of emerging financial strength because those creditors are privy to more information than equity investors.
Calls outnumbered puts by a bullish 48-to-1 ratio yesterday.
(Chart courtesy of tradeMONSTER)
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