Options Trading News

September 26, 2013  Thu 4:14 AM CT

A large trader is betting that Canadian Natural Resources will break out of its recent range.

optionMONSTER's Heat Seeker system detected the purchase of 5,000 November 32 calls at the same second in the final 4 minutes of yesterday's session, led by a print of 4,838 that went for $1. Open interest in the strike was a mere 7 contracts before the trade appeared, clearly showing that it is a new position.

These long calls, which lock in the price where the stock can be bought, are looking for CNQ to climb above $33 in the next seven weeks. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below the $32 strike price through mid-November. (See our Education section)

CNQ rose 0.74 percent yesterday to close at $31.43. The Calgary-based oil and gas producer has been trapped in a tight range between $31 and $32 all month, holding above support at its 50-day moving average.

Yesterday's call buying pushed CNQ's total option volume to 5 times its daily average for the last month, with overall calls eclipsing puts by more than 9 to 1. The last-minute bullish activity coincided with late-day call buying in another Calgary energy company, pipeline operator Transcanada.
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The art of trading

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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