Options Trading News

August 7, 2013  Wed 3:16 AM CT

Cimarex Energy drew bullish activity yesterday ahead of its earnings report this morning.

More than 1,400 September 85 calls traded in a strong buying pattern yesterday as premiums rose from $1.35 to $1.65, according to optionMONSTER's Heat Seeker tracking system. The volume was 11 times higher than the strike's previous open interest of just 130 contracts, showing that these are new positions.

These long calls lock in the price where traders can buy the stock through mid-September no matter how far it might rise. The options could be sold earlier at a profit if premiums rise with a rally before then, but they will expire worthless if shares remain below $85. (See our Education section)

XEC rose 0.48 percent yesterday to close at $79.47. The stock had risen steadily since bouncing at $65 in late June and broke through resistance last week, reaching a 52-week high of $81.87 on Thursday.

The oil and gas producer is scheduled to announce second-quarter results before the market opens today.

Total option volume in the name was nearly 9 times its daily average for the last month. Overall calls outnumbered puts by a bullish 10-to-1 ratio. 
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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.

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