Energy bulls set their sights on Hess
Energy has been coming to life, and today the bulls are piling into oil and natural-gas producer Hess.
optionMONSTER's Heat Seeker monitoring program detected the purchase of almost 3,400 August 85 calls for $1.75. Volume was more than quadruple open interest at the strike, an indication new money was put to work.
Long calls fix the level where a stock can be bought. Their cheap cost lets investors position for a rally while risking less capital than would be the case by owning shares. They can also generate huge leverage on a percentage basis--something we saw in abundance last week when crude oil pushed to its highest levels of the year. (See our Education section)
Exxon Mobil , for instance, saw its May 90 calls more than double last week from a move of less than 3 percent in the underlying stock price. Southwestern Energy 's May 26 calls doubled overnight last Wednesday and reached a triple by this morning. Perhaps the most stunning winner was Range Resources , where short-term April 60 calls shot up more than 300 percent in a matter of hours.
HES is up 1.3 percent to $78.47 in afternoon trading, and is up 15 percent in the last month. The sector has outperformed by a wide margin, climbing more than 5 percent over that period while the rest of the market was fractionally lower.
That recent run has brought most energy stocks like HES back to the top of their recent range. Traders may now be uncertain about which direction they'll move next, which is why they're buying calls instead of shares.
Total option volume is twice the daily average so far today, with calls outnumbering puts by a bullish 10-to-1 ratio.
Other noteworthy trades in the energy sector recently include Occidental Petroleum , Chevron , Oneok , and Spectra Energy . As with the names mentioned above, the option activity in all of these was cited in real time on our InsideOptions Pro service and resulted in substantial profits for subscribers.
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