Someone is looking for fireworks when Oil States International reports earnings tonight.
optionMONSTER's Heat Seeker monitoring system detected the purchase of about 5,100 August 105 calls for $2.05 and the sale of an equal number of August 115 calls for $0.35. Volume exceeded open interest at each strike, indicating that new money was put to work.
Owning calls locks in where shares can be purchased, while selling them forces the investor to unload the stock if it climbs to a certain level. Combining the two controls a move between two prices, in this case $105 and $115. It cost just $1.70 to open the position, implying profit of 488 percent versus the initial outlay. (See our Education section for more on the strategy, known as a bullish call spread .)
OIS is trading at $97.33 in afternoon trading, up 2.54 percent on the day and 24 percent since mid-April. Most of those gains came after Jana Partners disclosed a position in the name and Greenlight Capital spoke favorably of its business model.
The company provides a range of products services to energy companies, including tubes for oil wells and employee housing. Its last earnings report on April 24 caused little movement in the share price.
Total option volume is 12 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts by a bullish 34-to-1 ratio.
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