Forest Oil traders hunt for gusher

Pete Najarian (ask-pete@optionmonster.com)

Traders are looking for Forest Oil to rally after being trapped in an extremely tight range for the last month.

optionMONSTER's Heat Seeker system found heavy buying in the September 6 calls, which saw almost 3,000 contracts trade for $0.10 to $0.23 yesterday. Open interest in the strike was just 584 before the session began, indicating that new positions were established.

These long calls lock in a $6 purchase price for the stock for the next month no matter how far it might rise. But they could expire worthless if shares remain below that level through mid-September. (See our Education section)

FST gained 4.36 percent yesterday to close at $5.51, just below its 200-day moving average. Shares of the independent oil and natural-gas producer had been hovering just above $5 since late July, moving only slightly when the company reported mixed second-quarter results on Aug. 7.

Total option volume in the name reached 4,235 contracts yesterday, more than 6 times its daily average for the last month. Overall calls outnumbered puts by 15 to 1.

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

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