Emerald Oil plunged after reporting disappointing earnings earlier this month, but investors apparently remain optimistic that the energy company will turn things around.
Traders sold 2,663 August 5 calls for $1.60 to $1.70 and bought 2,500 October 5 calls for $1.80 to $1.91 on Friday, according to optionMONSTER's Heat Seeker system. Volume was below previous open interest in the August options, which expired at the end of last week, but above it in the October strike.
This indicates that investors closed the August contracts and rolled their positions to the later-dated options, essentially buying another two months for EOX to rally. But the new long calls , which will track the share price closely because they are in the money, will rapidly lose value if shares don't rise as expiration approaches in mid-October. Last month our systems detected a similar roll from July to August, and Friday's activity could well involve a continuation of that trade. (See our Education section)
EOX fell 1.19 percent to $6.63 on Friday. The Denver-based oil and gas company had seen its stock price double since last November along with other names operating in the Bakken shale region, but shares dropped sharply after second-quarter results missed estimates on Aug. 6.
Overall option volume in the name was 5,358 contracts on Friday, more than 11 times its daily average for the last month. Of those contracts, only 100 were puts.
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