These calls lock in the value investors must pay to get long the stock. Because they cost much less than the shares themselves, they can appreciate on a percentage basis much more than the stock if it moves in the right direction. But they will also expire worthless if that doesn’t happen.
Overseas Shipholding shares rose 6.11 percent to $9.03 yesterday. It has lost more than two-thirds of its value in the last year and is attempting to rebound from an all-time low established earlier this month.
That selloff has left it with a hefty short interest, some 39 percent of the float. The shares also trade for less than 0.2 time book value. Both of those considerations could help drive it higher.
Overall calls in the name outnumbered puts by more than 5 to 1, a reflection of the session’s bullish sentiment.
—Russell has no positions in OSG.
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David Russell is a reporter and writer for OptionMonster.