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Southwestern pullback draws bulls

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Southwestern Energy has pulled back, and the bulls are stepping in ahead of its earnings report at the end of this month.

optionMONSTER's Heat Seeker program detected the purchase of almost 13,000 August 45 calls yesterday, most of which priced for $0.49 to $0.60. Volume was more than 100 times the strike's previous open interest, which indicates that new money was put to work.

These long calls lock in the price where investors can buy stock in the Houston-based natural-gas producer, letting them profit from a rally with limited risk. The contracts can also generate significant upside leverage, but they will expire worthless if the stock remains below $45 through mid-August. (See our Education section)

SWN rose 2.33 percent to $43.39 yesterday. Shares are down from above $49 in April but are attempting to bounce near their 200-day moving average. Quarterly results are scheduled for July 31.

Total option volume in the name was 14 times greater than average in the session, with calls outnumbering puts by a bullish 26-to-1 ratio.

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

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