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Energy bulls focus on Occidental

David Russell (david.russell@optionmonster.com)

Energy has been the strongest sector recently, and bullish option activity is building in Occidental Petroleum.

optionMONSTER's Heat Seeker tracking program detected heavy call buying in the company this week, starting with the August 105s for $0.85 on Tuesday. Traders followed up yesterday with the purchase of 5,000 November 100 calls for $3.15 and 10,000 August 110s for $0.41. Volume exceeded open interest across the board, indicating that new money was put to work.

These long calls lock in the price where shares can be purchased, letting investors cheaply position for a rally without necessarily buying the shares. That allows the traders to avoid tying up large amounts of capital on a stock that has been trapped in a range for years. (See our Education section)

OXY rose 1.18 percent to $96.02 yesterday. The oil and gas producer gapped higher on Feb. 14 after announcing plans to spin off its California assets and move its headquarters to Houston, but the stock pulled back in March and is now trying to get moving again.

Overall option volume in Occidental was 10 times greater than average in the session, with calls accounting for a bullish 89 percent of the total.

Other energy companies have also drawn bullish activity in the last week, including Anadarko Petroleum, Denbury Resources, Magnum Hunter Resources, and Advantage Oil & Gas.

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

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