Options Trading News

March 4, 2013  Mon 1:47 AM CT

Heckmann has fallen sharply in the last month, but traders apparently believe that the bloodletting will end for the oil-services company.

More than 3,500 September 3 puts were sold on Friday afternoon, almost all of them in about 1 minute for the bid price of $0.25, according to optionMONSTER's tracking systems. The volume was nearly 7 times the strike's open interest of just 522 contracts before the session began, clearly showing that this is new positioning.

The put selling is a bet that HEK will stay above $3 by expiration in mid-September. If the stock falls below that level, the traders will face the obligation to buy shares at an effective price of $2.75 once the credit from the put sale is factored in. (See our Education section)

HEK rose 2.53 percent on Friday to close the week at $3.65. The company provides wastewater services for shale-gas production and is on the front lines of the controversial practice of fracking.

Shares had been trading sideways since November but gapped lower on Feb. 11 with a downgrade by Wedbush to "underperform" from "neutral," then dropped again on Feb. 21 when Jefferies lowered its rating on the name to "hold" from "buy." Both firms cited concerns that demand would fall short of Heckmann's expectations this year.

Management will release fourth-quarter and 2012 results on March 11 after the close. The company is also scheduled to present at the Credit Suisse Global Services Conference on March 12 and at the Roth Conference on March 18.

Overall option volume in the name totaled 5,285 contracts, triple its daily average of 1,660 in the last month. 
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I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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