Options Trading News

March 21, 2013  Thu 9:44 AM CT

The bulls targeted Hercules Offshore yesterday, and they're coming back today.

optionMONSTER's Heat Seeker tracking program detected the purchase of about 3,400 May 8 calls for $0.35 o $0.40. That follows buying for $0.20 to $0.30 yesterday.

Long calls
lock in the price where investors can buy shares in the oil-service stock. Given their low price, they can generate tremendous leverage on a percentage basis if shares move in the right direction. (See our Education section.)

The strategy makes a lot of sense in the case of a stock like HERO, which is challenging a long-term resistance level in place since mid-2009. Some traders may expect a big move if it breaks out while remaining concerned about a drop. Calls provide upside exposure cheaply while limiting the amount of capital at risk in the event of a pullback.

HERO is up 1.38 percent to $7.36 in morning trading and has risen 48 percent in the last six months. Total option volume is 7 times greater than average so far today, according to Heat Seeker. Calls outnumber puts by a bullish 20-to-1 ratio.
Share this article with your friends


Premium Services

Education & Strategy

The art of trading

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.

View more education articles »