The U.S. Natural Gas Fund is drawing large trades that are apparently counting on its shares to rise 20 percent in the next five months.
More than 31,700 calls traded at the October 20 strike yesterday (Thursday), dwarfing the average volume of 523 contracts, according to OptionMonster's tracking programs. The calls included two large blocks — one of 4,000 contracts and the other of 22,000 — trading at $1.45 within seconds of one another yesterday.
The vast majority of the calls, which were nearly five times the open interest at that strike, were bought at or near the ask price. Those factors suggest that these trades were new positions with a bullish bias. The activity indicates that buyers anticipate the UNG exchange traded fund to reach $20 by the time the contracts expire in mid-October.
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The ETF has been rising in recent weeks but is still not far from its 52-week low of $12.69 hit just April 30, and only about one-fourth of its $63.89 high from last July.
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More Natural Gas/Energy Plays:
Chesapeake Energy
Anadarko Petroleum
United States Oil Fund
Energy Select Sector SPDR
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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.
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