NiSource pullback brings out bulls

Mike Yamamoto (

Option traders were piling into NiSource yesterday as shares pulled back from all-time highs.

About 8,000 June 38 calls were purchased for $0.15 and $0.20 in midday trading, according to optionMONSTER's Heat Seeker tracking system. Open interest in the name was a mere 61 contracts before the trades appeared, showing that this is fresh buying.

These long calls lock in the price where the stock can be purchased through mid-June no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $38. (See our Education section)

NI reversed early losses with the call action yesterday and closed higher by 0.14 percent to $35.99, not far from the lifetime high of $37.18 it reached last Thursday. The energy company beat earnings and revenue forecasts on April 30, and management reaffirmed guidance.

Total option volume in the name reached 12,600 yesterday, 22 times its daily average for the last month. Fewer than 100 of those contracts were puts, reflecting the session's strongly bullish sentiment.

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

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