Trade bets on more gains in Kodiak

optionMONSTER

Kodiak Oil & Gas has been running, and the bulls are looking for more.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 6,300 December 12 calls for $0.29. A large trade occurred at the same time in the September 10 calls, which were sold for $0.31, and the September 11 calls, which were bought for $0.09. Volume was below open interest in the nearer-dated contracts, indicating that an existing position was closed and rolled forward in time.

Owning calls lock in the price where shares can be purchased, while selling them generates income. Combining the two strategies is known as a vertical spread and controls a move between two prices, which is what they had previously done in September.

The investor apparently collected $0.22 in exiting that position and used the money to buy the December 12 calls, resulting in a net cost yesterday of $0.07. This way he or she has an additional two months to benefit from gains in the stock. (See our Education section)

KOG rose 0.7 percent to $10.06 yesterday and is up 12 percent in the last three months. The Denver-based energy stock is back near its highs from last year, and yesterday's option trade is looking for a breakout into new territory in coming months.

Almost 20,000 contracts changed hands in the session, roughly 15 times the average amount. Calls outnumbered puts by a bullish 50-to-1 ratio.


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