Market News

June 14, 2013  Fri 12:20 PM CT

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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Using puts to BUY stock

Puts are an options contract that gives buyers the right to sell their stock for a set price on or before a future date. However, puts can also be an effective way to BUY stock.

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