Is Apache on its way for triple digits?
David Russell | email@example.com
optionMONSTER's tracking programs detected the purchase of 10,000 January 90 calls for $3.51 and the sale of an equal number of January 100 calls for $1.36. Volume was more than quadruple open interest at each strike, indicating new activity.
Owning calls locks in the price where investors can buy shares, while selling them fixes a maximum exit level. Combining the two strategies lets them control the spread between two prices at low cost.
For instance, yesterday's Apache trader paid just $2.15 to open the position and will collect $10 if the stock closes at or above $100 on expiration. That's a profit of 365 percent in the options from a move of less than 20 percent in the share price. (See our Education section for more on how options can be used to generate leverage.)
APA rose 3.42 percent to $84.08 yesterday and is up 24 percent since hitting a four-year low last month. The natural-gas and oil producer is one of several energy companies that have rallied in recent weeks as investors turn bullish on the global economy.
Total option volume was 5 times greater than average in Apache yesterday. Calls accounted for a bullish four-fifths of the total.
(A version of this post appeared on InsideOptions Pro yesterday.)