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June 14, 2013  Fri 12:20 PM CT

MHR: SEE CHART GET CHAIN FIND STRATEGIES
Magnum Hunter is off its recent highs, but one investor is confident that it won't go much lower in the long term.

optionMONSTER's trade scanners detected the sale of 5,000 January 2015 4 puts for $1.15. Volume was 50 times previous open interest, indicating that a new position was initiated.

The trader is now obligated to buy shares in the Houston-based oil driller for $4 if they close below that level 18 months from now, but the price would be $2.85 including the put credit received today. If the stock goes above $4, he or she will keep the $1.15 credit as the contracts expire worthless. (See our Education section for more on put selling.)

MHR trading at $3.85 this afternoon, down 1.28 percent on the session but up 14 percent in the last month. Total option volume is already almost 6 times greater than average so far.
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Most investors have heard about selling options as a form of income generation. You hear it from brokers and financial advisors as a way to generate income without selling off pieces of your nest egg, dwindling through your retirement accounts, and then being stuck figuring out how to financially afford the rest of your life...

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