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Call buyers muscle into Hercules

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders are looking for shares of Hercules Offshore to pop by early next year.

More than 2,000 January 6 calls were purchased for $1.95 to $2.10 yesterday, according to optionMONSTER's Heat Seeker real-time tracking system. This is clearly fresh buying, as open interest in the strike was a mere 72 contracts before the session began.

These long calls , which lock in the price where traders can buy the stock through mid-January, will track the share price closely because they are in the money . They could be sold earlier if premiums gain with a rally before then, but the contracts will rapidly lose value if the stock doesn't advance in coming months. (See our Education section)

HERO rose 2.83 percent yesterday to close at $7.63. The oil and natural-gas driller bounced off its 200-day moving average in mid-August and has been working its way higher since.

Total option volume in the name topped 4,900 contracts yesterday, compared with a daily average of just 737 for the last month. Only 111 puts changed hands in the session, a further indication of the day's bullish sentiment.


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