Options Trading News

December 20, 2012  Thu 3:47 AM CT

Cenovus Energy does not usually see much option activity, but yesterday traders were snapping up calls in the integrated oil company.

optionMONSTER's Heat Seeker system detected the purchase of 1,303 January 35 calls for $0.40 to $0.50. The volume was 6 times the strike's open interest of 216 contracts at the beginning of the day, so this is fresh buying.

The long calls, which lock in the price where traders can buy the stock, are betting that CVE will gain at least 5 percent by expiration on Jan. 18. The traders can sell those options at a profit earlier if premiums rise before then with any rally, but the calls will expire worthless if the stock doesn't rise. (See our Education section)

CVE rose 0.87 percent yesterday to close at $33.75, right at its 50- and 100-day moving averages. Shares have been trapped mostly between $32 and $36 since early August.

Total option volume in the name was just 1,397 contracts yesterday, but that is 13 times its daily average of just 109 in the last month. Only 31 calls traded in the entire session, an indication of the bullish sentiment.
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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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