Credit: Shutterstock photoEncana reports earnings tomorrow, and the bulls are piling in.
optionMONSTER's Heat Seeker monitoring program detected the purchase of more than 13,000 August 22 calls today, most of which priced for $0.50. Volume was more than 10 times the previous open interest in the strike, which indicates that new money was put to work on the long side.
Those investors now have the right to buy shares in the Canadian energy stock for $22 through expiration, no matter how high it may be at that time. So even a modest move can result in significant leverage through the long calls . Another benefit is that only a small fraction of the share price is at risk. (See our Education section)
ECA is up 1.43 percent to $21.62 in afternoon trading. It began the year on a strong note, rallying more than 30 percent between January and late June. It pulled back in the last month but has been trying to hold support above $21 this week.
Earnings have beaten expectations for each of the last five quarters, and management has been working to improve its operations according to a plan unveiled in November. Its main goals are cost reduction, investment in North American liquids production, asset sales, and increased shareholder payouts.
Total option volume is quadruple the daily average, with calls outnumbering puts by a bullish 16-to-1 ratio.
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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.
