SandRidge bull buys time for pop

Mike Yamamoto (
June 6, 2014

A large investor is buying another two months for SandRidge Energy to rally.

optionMONSTER's Heat Seeker system shows that the trader sold 4,000 June 7 calls mostly for $0.06 and bought the same number of August 7 calls mostly for $0.29. Volume was below previous open interest in the near-term strike but above it in the later contracts, indicating that a long position was rolled forward.

The trader is closing the June contracts, which expires two weeks from today, and is paying a net $0.23 to open a new position in August. The new long calls will turn a profit if SD rises above $7.23 but will lose value if shares stall or pull back as expiration approaches in mid-August. (See our Education section)

SD was up fractionally to close at $6.80 yesterday. The oil and natural-gas company has been trading in an increasingly tight range since pulling back from a 52-week high of $7.10 on April 23.

Total option volume in the name yesterday was nearly double its daily average for the last month. Overall calls outnumbered puts by a bullish 20-to-1 ratio.

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