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Trade sees more fuel in EV Energy's tank

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)

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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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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