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Spectra Energy draws late bull run

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders turned bullish on Spectra Energy late yesterday.

More than 8,800 September 46 calls traded for $0.20 to $0.40 with less than an hour left in the session, according to optionMONSTER's Heat Seeker tracking system. These are clearly new positions, as open interest in the strike was a mere 4 contracts before the trades appeared.

Another 4,800 August 44 calls changed hands for $0.30 to $0.60 at the same time. This was also new positioning, as previous open interest in that strike was just 1 contract.

These long calls lock in the price where the stock can be purchased no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before expiration, providing potentially significant leverage, but the contracts can quickly lose value if shares stall or decline. (See our Education section)

SE was up 0.23 percent yesterday to close at $42.66, just off its all-time high of $42.72 reached on July 1. The oil and natural-gas pipeline company reports second-quarter results on the morning of Aug. 6.
Total option volume in Spectra topped 19,000 yesterday, 14 times its daily average for the last month. Only 235 of those contracts were puts, a reflection of the session's bullish sentiment.

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

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