Energy bulls returning to Talisman
David Russell | firstname.lastname@example.org
On Tuesday we cited the purchase of January 14 calls in the Canadian oil driller for $0.35. The stock pushed higher yesterday, and those calls almost doubled to $0.60 by the early afternoon.
Then the bulls went right back to work, this time targeting the January contracts. optionMONSTER's Heat Seeker scanners showed that a trader bought 7,000 January 14 calls and sold a matching number of the January 11 puts yesterday.
He or she paid only $0.44 for the long calls and collected $0.48 selling the puts, resulting in a small credit. A block 6,000 October 13 calls were sold around the same time for $0.11, but volume was below open interest in those. So it appears that the investor exited a long position in October and now wants to ride TLM into early next year.
The new January position controls the equivalent of about 360,000 shares with no up-front cost. That will increase to 700,000 shares if the stock is above $14 on expiration. But the investor also faces significant downside risk because of the short puts, which would require that the stock be purchased if it falls below $11. (See our Education section)
TLM rose 3.16 percent to $12.39 yesterday and is up 16 percent in the last month. Nonetheless, it has gone nowhere since late 2011 and is now in the middle of a long-term trading range.
Total option volume was 9 times greater than average in the name yesterday, according to the Heat Seeker.