U.S. Markets closed

What's behind call surge in Gulfport

David Russell (david.russell@optionmonster.com)

Gulfport Energy has been bullish before, and one investor apparently thinks that it will be again.

optionMONSTER's Heat Seeker tracking program detected the purchase of 10,323 January 67.50 calls for $1. An equal number of April 80 calls was sold at the same time for $0.75, but volume at that strike was below open interest. This suggests that an existing trade was adjusted to the nearer strike.

The investor probably bought the April 80 calls when the stock was trading higher, looking for a continued rally, but then it pulled back. Adjusting the position doubled the position's delta from 0.10 to 0.20, meaning it would have more leverage to a rebound and need less appreciation to make money.

It also demonstrates the value of options as a risk-management tool because those longer-dated April calls had more time value and were therefore less vulnerable to a pullback. That partially protected their capital and made it possible to modify the position later. (See our Education section)

GPOR rose 2.87 percent to $59.07 yesterday and had climbed steadily along with other domestic energy companies. It almost doubled between the start of the year and mid-October before pulling back.

There were also bullish option trades on Aug. 26 and Nov. 1 , both of which threw off nice profits in later sessions.

Almost 22,000 contracts traded yesterday, more than triple the daily average. Calls outnumbered puts by a bullish 100-to-1 ratio.

More From optionMONSTER