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February 20, 2013  Wed 9:11 AM CT

HK: SEE CHART GET CHAIN FIND STRATEGIES
Halcon Resources is drawing a bullish play ahead of the company's quarterly report next week.

A block of 2,000 March 6 calls was purchased for the ask price of $1.55 about 20 minutes after the open, according to optionMONSTER's Heat Seeker system. This is clearly a new position, as open interest in the strike was just 38 contracts before the session began.

The long calls, which lock in the price where the trader can buy the stock, are betting that HK will pop by mid-March. But these in-the-money options will rapidly lose value if the shares don't rise. (See our Education section)

The independent oil and natural-gas company is scheduled to announce fourth-quarter and 2012 results next Thursday, Feb. 28. HK is up fractionally at $7.49 this morning, just above its 50-day moving average as it continues to trade in a tight range between about $7.15 and $8.25 that has been in place since the beginning of this year.

Today's call buying makes up nearly all of the total option volume in the name, which is already well above its full-session average. No HK puts have changed hands so far.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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