Is Forest Oil finally ready to bounce?

David Russell (david.russell@optionmonster.com)
November 21, 2012

Bullish traders are piling into Forest Oil as the stock tries to bounce at its July lows.

optionMONSTER's trade scanners yesterday detected heavy buying in the December 8 calls, which totaled more than 4,200 contracts compared with previous open interest of just 105. Almost all the trades priced for $0.10.

Those buyers locked in an $8 entry price in the oil stock for the next 4-1/2 weeks. The calls stand to generate big leverage if the shares rally but will expire worthless if the stock doesn't move. (See our Education section)

FST fell 1.19 percent to $6.62 yesterday but came off its lows as the calls hit. Last week the shares held the same $6 level where they bottomed over the summer, which could be leading some traders to believe that the oil and gas company is ready to rebound.

Total option volume was 9 times greater than average in the session, with calls outnumbering puts by more than 7 to 1.

(A version of this post appeared on InsideOptions Pro yesterday.)

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