The calls lock in the entry price investors must pay to buy the underlying shares. As a result, these options can deliver major leverage if the stock rallies but will expire worthless if it doesn't.
McDermott dropped sharply last August and has been trapped between $10 and $14 since then, below its 200-day moving average near $16. McDermott, an engineering company that builds and manages complex offshore oil and gas projects, was downgraded to “neutral” by Goldman Sachs last week with a $13 price target.
McDermott shares closed at $11.94 yesterday, down 0.67 percent. Overall option volume in the name was nine times greater than average in the session as calls outnumbered puts by 17 to 1.
—Najarian has no positions in MDR.
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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com.