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Bulls pile into Midstates Petroleum

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders are looking for a rally in Midstates Petroleum by next spring.

More than 3,600 March 7.50 calls traded in a bullish pattern for $0.40 to $0.50 yesterday, according to optionMONSTER's Heat Seeker tracking system. The volume was well above the strike's previous open interest of 994 contracts, indicating that these are new positions.

These long calls lock in the price where the stock can be purchased through mid-March 2014 no matter how far it might rise. They could be sold earlier a profit if premiums gain with a rally before then, but the contracts will expire worthless if shares remain below the $7.50 strike price. (See our Education section)

MPO rose 1.49 percent to $5.46 yesterday. Shares spiked higher on Sept. 11 when the Houston-based oil company reported improving production numbers, but they have been trading in an increasingly tight range since then.

Yesterday's trades pushed total option volume in the name above 4,200 contracts, more than 24 times its daily average. Only 180 of those options were puts, another sign of bullish sentiment in the name.

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

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