Options Trading News

September 12, 2013  Thu 4:14 AM CT

Cabot Oil & Gas has been running higher with other energy names, and one large trader apparently believes that it has more fuel left in its tank.

optionMONSTER's Heat Seeker system shows that a trader sold 5,000 October 38.75 calls in two blocks for $1.15 and $1.10 yesterday while buying 7,000 January 42.50 calls for the ask price of $1.40. Volume was below open interest in the October strike but above it in the January contracts, indicating that a position is being rolled forward to a higher strike.

The trader is apparently closing the nearer-dated calls, which are now in the money, and opening the new position three months later. The adjustment is especially bullish because the investor is increasing the size of the trade in addition to moving it to a strike that is $3.75 higher, but the new long calls will expire worthless if the stock remains below $42.50 through mid-January. (See our Education section)

COG gained 0.67 percent yesterday to close at $38.88. The energy company pulled back after reaching an  all-time high of $40.34 on Sept. 3 but has been holding support at the $38 level.

Total option volume in COG topped 18,800 contracts yesterday, nearly 6 times its daily average for the last month. Overall calls outnumbered puts by more than 15 to 1.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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