Options Trading News

November 21, 2013  Thu 12:01 PM CT

Energy is coming back to life, and the paper is flowing in Schlumberger.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 January 92.50 calls for $2.08 and the sale of an equal number of January 97.50 calls for $0.65. Volume was below open interest at the lower strike so there are two possible explanations of the activity.

One is that the investor owns shares and had sold the 92.50s as part of a covered-call strategy. He or she may have then adjusted the position higher, raising the eventual exit price by $5.

Alternatively, both halves of the trade may have been opened. In that case it was a bullish call spread with the potential to earn 250 percent if the stock reaches $97.50 or higher by expiration. Either way, they paid $1.43 and are looking for higher prices. (See our Education section)

SLB is up 0.29 percent to $90.71 in afternoon trading and has risen 29 percent in the last year. The Franco-American oil-servicing company has pulled back to its 50-day moving average and is pausing near its previous long-term highs from 2011. Today's trader is looking for a breakout levels last seen before the market crashed in 2008.

Other energy-related names have also been active recently, including Newfield Exploration and W&T Offshore.

Total option volume is twice the daily average so far in the session, according to the Heat Seeker. Calls outnumber puts by more than 5 to 1.
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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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