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Why Are Call Buyers Stepping Into This Offshore Driller?

Monday, 21 Jun 2010 | 7:59 AM ET

Hornbeck Offshore Services has gotten hammered along with BP and others in the energy space after the Deepwater Horizon oil spill, but call buyers stepped in Friday.

OptionMonster's tracking systemsdetected a surge of activity in the July 17.50 strikes, which traded early in the session for $0.20. The buying continued, boosting the premiums to $0.25 and then $0.30 as the stock steadily pushed higher. By the end of the session 2,595 calls had changed hands versus open interest of just 359 contracts.

Shares in the company , which operates offshore support and supply vessels to energy companies in the Gulf of Mexico, climbed 4.46 percent to $14.98 on Friday. They traded over $24 in early May but got smacked all the way down to below $13 in early June after the accident. Earlier this week, however, the CEO and other insiders stepped in to buy stock around the $14.30-$14.50 level.

Judging by that and the options action, it looks as if there is a growing belief that Hornbeck will rebound to the upside. It needs to rally more than 18 percent by expiration for the call buyers to turn a profit.

Friday's activity pushed total options volume in the name to four times greater than average. Calls outnumbered puts by 19 to 1.

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Hornbeck Offshore Services Competes With:

Seacor Holdings

Tidewater

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Options Trading School:

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Disclosure:

Najarian owns HOS calls

Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com.

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Disclaimer

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