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Nabors draws buyers before deal

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Bulls piled into Nabors Industries as energy names rebounded yesterday, and the traders will likely reap some quick rewards based on news that broke after the close.

The oilfield-service stock was up in extended-hours trading last night after announcing that one of its business units was merging with C&J Energy . The estimated $2.86 billion deal , which involves Nabors' oil and gas well production operations in the United States and Canada, will result in a cash payment of $940 million and more than 62.5 million shares in the new company.

Earlier in the day, optionMONSTER's Heat Seeker system detected the purchase of 2,700 NBR September 30 calls for $0.58 to $0.63. The volume was more than 10 times its previous open interest, which indicates that new money was put to work.

These long calls lock in the price where the stock can be purchased through mid-September no matter how far it might climb. They could be sold earlier at a profit with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $30. (See our Education section)

NBR rose 1.87 percent yesterday to close at $27.30 after bouncing sharply off its 30-day moving average, which has served as support all year, and gained another 4.58 percent to $28.55 in post-market trading. The stock reached $28.63 last Friday, its highest price since May 2011.

Total option volume in the name yesterday was almost triple its daily average for the last month.

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

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