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Has Forest Oil Finally Bottomed?

David Russell | Writer, OptionMonster
Wednesday, 21 Nov 2012 | 6:04 AM ET

Bullish traders are piling into Forest Oil as the stock tries to bounce at its July lows.

OptionMonster's trade scanners yesterday detected heavy buying in the December 8 calls, which totaled more than 4,200 contracts compared with previous open interest of just 105. Almost all the trades priced for $0.10.

Those buyers locked in an $8 entry price in the oil stock for the next 4 1/2 weeks. The calls stand to generate big leverage if the shares rally, but will expire worthless if the stock doesn't move.

Forest Oil shares fell 1.19 percent to $6.62 yesterday, but came off its lows as the calls hit. Last week, the shares held the same $6 level where they bottomed over the summer, which could be leading some traders to believe that the stock is ready to rebound.

Total option volume was 9 times greater than average in the session, with calls outnumbering puts by more than 7 to 1.

—By CNBC Contributor David Russell

Additional News: Don't Expect a Big Jump in Oil Prices: Survey

Additional Views: Bulls Look for Enbridge to Bounce: Russell

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David Russell is a reporter and writer for OptionMonster. Russell has no positions in FST.

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