Energy bulls finally turn to Weatherford
David Russell | email@example.com
optionMONSTER's tracking programs detected the purchase of almost 51,000 January 2014 20 calls yesterday against previous open interest of just 492 contracts. Most of them traded in two large blocks for $1.05.
Long calls lock in the price investors must pay to buy shares, so they can generate some nice leverage in the event of a rally. But these options will expire worthless if the stock doesn't move. (See our Education section)
WFT, which provides equipment and services to energy drillers, rose 2.31 percent to $12.82 yesterday. The stock has been bottoming out between $11 and $12 since early June while other companies in the sector have ripped higher amid a surge of bullish option activity.
Using calls that expire in 2014 gives the investor plenty of time for a rally, while avoiding big losses if the stock drops.
Overall option volume was 8 times greater than average in WFT yesterday. Calls outnumbered puts by a bullish 15-to-1 ratio.
(A version of this post appeared on InsideOptions Pro yesterday.)