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Southwestern Energy draws bulls

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders are turning bullish on Southwestern Energy ahead of its earnings report next week.

optionMONSTER's Heat Seeker system shows that 15,000 June 47 calls were bought in one print yesterday for the ask price of $1.05. This is clearly a new position, as open interest in the strike was a mere 157 contracts before the trade appeared. Volume in those calls would eventually reach 19,745 by the end of the day, with premiums as high as $1.34.

These long calls lock in the price where the stock can be purchased through mid-June no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless with shares below $47. (See our Education section)

SWN fell 1.33 percent yesterday to close at $42.28. The stock gapped higher after on Jan. 22 when Sterne, Agee & Leach raised its rating on the name to "buy" from "neutral" with a $48 price target, but shares have been trading mostly between $40.50 and $43 since.

The natural-gas and oil producer is scheduled to release quarterly results next Thursday after the close.

Total option volume in SWN topped 27,300 yesterday, 8 times its daily average for the last month. Overall calls outnumbered puts by more than 15 to 1, a reflection of the session's bullish sentiment.

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