Big Bullish Bet on Natural Gas

A large trader turned bullish on Ultra Petroleum late Thursday ahead of its earnings report Friday morning. (Earnings update: See below.)

OptionMonster's real-time systems detected a single print of 8,000 August 45 calls bought for $1.15. The unusual volume dwarfed the strike's daily average of 172 calls and was far above the open interest of 1,036 contracts, clearly indicating that the trade was establishing a new position.

UPL shares closed yesterday up 1.23 percent to $43.70 and gained another nickel in after-hours trading. Shares of the oil and gas company were trading above $53 less than two months ago but appear to be consolidating in a narrow range near recent support levels.

The stock must gain at least 5.6 percent by the August expiration for yesterday's call buyer to turn a profit. Traders were also selling UPL puts at various August and September strikes well above open interest, further indicating a belief that the stock price has reached a bottom.

The company is scheduled to release its quarterly results today right at the opening bell. Traders may be hoping that it is benefiting from rising demand for natural gas during this summer's record-breaking heat wave across much of the country.

(Update: Ultra Petroleum released its earnings report Friday. It reaffirmed its 2010 capital budget and production guidance; and said it'd increase its hedging.)


Yamamoto does not hold significant shares of UPL.

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Mike Yamamoto is an analyst and writer for OptionMonster.