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Bulls look for gusher in Forest Oil

Wednesday, 21 Aug 2013 | 5:16 AM ET
Cameron Davidson | Workbook Stock | Getty Images

Traders are looking for Forest Oil to rally after being trapped in an extremely tight range for the last month.

OptionMonster's tracking systems found heavy buying in the September 6 calls, which saw almost 3,000 contracts trade for $0.10 to $0.23 yesterday. Open interest in the strike was just 584 before the session began, indicating that new positions were established.

These long calls lock in a $6 purchase price for the stock for the next month no matter how far it might rise. But they could expire worthless if shares remain below that level through mid-September.


Geopolitical premium placed on oil?
Barry Knapp, Barclays provides his thoughts on whether the violence in Egypt will likely run up oil prices. Also a look at where Knapp is seeing global investment opportunities in the markets.

Forest Oil gained 4.36 percent yesterday to close at $5.51, just below its 200-day moving average. Shares of the independent oil and natural-gas producer had been hovering just above $5 since late July, moving only slightly when the company reported mixed second-quarter results on Aug. 7.

Total option volume in the name reached 4,235 contracts yesterday, more than six times its daily average for the last month. Overall calls outnumbered puts by 15 to 1.

—By CNBC Contributor Pete Najarian

Additional News: Egypt risk premium built-in, limiting oil's gain

Additional Views:Forest Oil Pullback Brings Out the Bulls

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Disclosures:

Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com. Najarian has no positions in FST.

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