Options Trading News

July 16, 2013  Tue 3:47 AM CT

Someone apparently thinks that Exco Resources is ready to break resistance and push higher.

optionMONSTER's Heat Seeker monitoring program detected the purchase of some 3,700 August 8 calls yesterday, most of which priced for $0.75 and $0.80. Volume was almost triple the previous open interest at the strike, so this is fresh buying.

These long calls lock in the price where shares can be purchased in the Dallas-based oil company. Investors buy the options to prevent to generate leverage, but the contracts can expire worthless without a rally. Yesterday's calls are especially interesting because they are in the money, making them track the stock price closely.

As a result, a move of roughly 10 percent in the shares could double the value of the calls. (See our Education section for more on the use of leverage in options.)

XCO fell 1.51 percent to $8.47 yesterday. It lost more than two-thirds of its value in 2011 and early 2012 but has been moving sideways since. The stock is now back around the same $8.60 level where it peaked in May, which could make some traders expect a big move if resistance is broken.

Total option volume was 6 times greater than average in the session, according to the Heat Seeker. Calls outnumbered puts by more than 4 to 1.
Share this article with your friends

Invest Like a Monster - San Antonio: October 9-10


The fastest money in the market
View full report »

Premium Services

Archived Webinar

Education & Strategy

The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

View more education articles »