Options Trading News

One investor is hoping it's not too late to get long Encana.

optionMONSTER's monitoring programs detected the sale of about 4,000 August 23 puts for an average premium of $0.94, plus the purchase of about 3,000 August 22 puts for $0.40. Volume was more than 4 times the open interest at each strike, indicating that this is new activity.

ECA is down 1.31 percent to $22.49 in morning trading but is up 14 percent in the last month. The Canadian natural-gas company has been climbing along with other energy names as investors return to a sector that had lagged earlier in the year amid worries about the global economy.

Today's option trade generated a credit of about $256,000 and is unusual because it used in-the-money puts. If ECA stays below $23 through the end of next week, the trader will be required to buy shares for that price. But most of the position will also be hedged against a major drop because he or she owns the 22s.

If ECA rallies above $23, both contracts will expire worthless and the trader will keep the $256,000 as profit. (See our Education section for more on credit spreads.)

The trade drove overall option volume in the name to twice the daily average.