Forest Oil traders hunt for gusher

optionMONSTER

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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