Denbury Resources is seeing heavy call activity as shares pop today, but the direction of the trades are unclear.
DNR is up 5.9 percent to $15.49. The oil and gas company is approaching a resistance level near $16 that has been in place since mid-May. The bottom of its recent trading range is near $13 and includes the 2012 lows from late June.
The option volume in DNR tops 10,000 contracts, which is 10 times its daily average for the last month. Virtually all of the activity is in one call spread.
A trader bought 5,000 August 16 calls for $0.53 against open interest of 5,550 contracts while selling 5,000 September 17 calls for the bid price of $0.45, according to optionMONSTER's systems. Open interest at the September strike was just 602 contracts, so that is new activity.
This could be a short diagonal spread that is looking for DNR to rise in the short term but not above $17. But it is more likely that the trader is rolling a short call position out a month to a higher strike price. If the latter is true, those options could have been sold naked or against long shares as a covered call . (See our Education section)
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