The energy trade has been a constant drumbeat for months, and yesterday the bulls turned to Encana.
optionMONSTER's Heat Seeker system detected heavy buying in the February 19 calls, initially for $0.45 to $0.50. The Canadian natural-gas producer was trying to hold support at $19 when the trades hit, but then it started to climb.
Long calls lock in the price where investors can buy shares, so they can generate some nice leverage in the event of a rally. That's what happened as the stock pushed higher because those options would trade for $0.80 later in the session. Some 12,600 contracts changed hands against previous open interest of just 709 in the strike at the beginning of the day, clearly indicating new activity.
ECA finished the day up 2.1 percent to $19.47. Shares had been holding key support above $19 for more than a month.
Total option volume in the name was almost 8 times greater than average in the session. While there was also heavy put activity, most of those contracts were sold. That's also bullish because it reflects a belief that there is little downside risk.
(A version of this post appeared on InsideOptions Pro yesterday.)
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