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Ultra Petroleum draws call buyers

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders are turning bullish on Ultra Petroleum ahead of its earnings report in two weeks.

More than 2,000 May 28 calls were bought for $0.15 and $0.20 yesterday, according to optionMONSTER's Heat Seeker tracking system. The volume was well above the strike's previous open interest of 496 contracts, indicating that new positions were established.

These long calls lock in the price where the stock can be purchased for the next month 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 if shares are below $28 in mid-May. (See our Education section)

UPL gained 2.46 percent yesterday to close at $27.94. The stock has pulled back since peaking at $29.52 on April 7, its highest price since January 2012, but appears to have found support at the $27 level in recent days.

Last week Imperial Capital upgraded the name to "outperform" from "in line" and raised its price target to $33 from $13. The oil and natural-gas producer is scheduled to release first-quarter results on May 1.

Total UPL calls outstripped puts by 4 to 1 yesterday, a reflection of the session's bullish sentiment.

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