Pipeline company Enbridge Energy is drawing bullish option activity.
optionMONSTER's tracking programs Friday showed the purchase of about 2,800 December 27.50 calls, most of which priced for $0.85. Volume was more than 50 times open interest at the strike, indicating that new positions were initiated.
Those calls lock in $27.50 as the purchase price on EEP shares in the next five weeks, no matter how high the stock goes. That will provide significant leverage in the event of a rally, but the contracts will lose all their value from even a modest decline. (See our Education section)
EEP rose 2.36 percent to $28.25 on Friday and is trying to build support around the same $27.50 area where it bounced in June. The stock had peaked above $30 earlier this month.
Total option volume in the name was 5 times greater than average in the session, with calls outnumbering puts by a bullish 32 to 1.
(A version of this post appeared on InsideOptions Pro on Friday.)
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