Call trade sees new highs for Hess
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 May 75 calls for $1.35 and the sale of an equal number of May 82.50 calls for $0.25. Volume was below open interest at the lower strike, so there are two possible explanations for the activity.
One is that they own shares in the New York-based oil company and had previously sold the 75s as part of a covered call strategy. He or she may have closed that position and rolled it up to the 82.50s, securing the right to sell their stock for $7.50 more.
Alternatively, both halves of the trade may have been opening positions, in which case it is a bullish call spread with a maximum potential profit of 582 percent. (See our Education section)
Either way, the transaction cost $1.10 and is looking for HES to break its 52-week high of $74.48 in the next two weeks.
HES is up 1.37 percent to $73.20 in afternoon trading. The company stunned the market on Jan. 28 by announcing that it would exit the storage and refining businesses, then reported a strong earnings report two days later. That fueled a gain of 35 percent in the first quarter, more than triple the move of any other integrated oil name in the same period.
Since then the stock has been consolidating above its earlier peaks from March 2012, and today's activity suggests that traders think it's ready to run back to levels last seen in March 2011.
Total option volume in the name is triple its daily average so far today, according to the Heat Seeker. Calls outnumber puts by more than 4 to 1.