Ensco attracts heavy call buying
Ensco bounced off a two-year low on Friday, and traders are betting that the offshore driller will keep rising.
More than 17,000 October 52.50 calls were bought for $0.15 to $0.35 in afternoon trading, according to optionMONSTER's Heat Seeker tracking program. Open interest in the strike was just 650 contracts before the trades appeared, showing that these are new positions.
These long calls lock in the price where the stock can be purchased through mid-October no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $52.50. (See our Education section)
The stock had recovered after Deutsche Bank downgraded to the name to "hold" from "buy" in early August, but it gapped down from above $49 on Thursday following its presentation at the Barclays Energy-Power Conference day earlier. Some technicians say this pushed the stock into oversold territory .
ESV ended Friday's session off 0.17 percent to $47.46. The stock had fallen to $46.43 earlier in the day, its lowest intraday price since July 2012.
Friday's total option volume in the name topped 40,000 contracts, 11 times its daily average for the last month. Overall calls outnumbered puts by about 3 to 1.
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