OptionsHouse

Options Trading News

March 15, 2013  Fri 5:14 AM CT

XCO: SEE CHART GET CHAIN FIND STRATEGIES
EXCO Resources ripped higher yesterday, and option traders are looking for even more gains.

optionMONSTER's Heat Seeker scanners detected heavy trading in the April 8 calls for $0.24 and $0.25 yesterday, with more than 2,800 contracts changing hands in volume that was far above the previous open interest of just 11. Those calls lock in the price where investors can buy shares in the independent oil and natural-gas company, which is focused on shale resources.

The calls can generate some nice leverage if XCO continues to climb but will expire worthless if it doesn't. Traders use these contracts for cheap upside positions, limiting the amount of capital at risk if they get the direction wrong.

XCO ended the session up 9 percent to $7.75. The company recently boosted its quarterly dividend by 25 percent, and shares are up 19 percent in just the last week.

More than 7,200 calls traded versus 1,140 puts, a reflection of the day's bullish sentiment in the name. Total option volume was 4 times greater than average.

Disclosure: I own XCO calls.

(A version of this post appeared on InsideOptions Pro yesterday.)
Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

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.

View more education articles »