Option Bulls Set Sights on Magnum Hunter

Getty Images

Bears have been running the show at Magnum Hunter Resources, but yesterday the buying heated up.

OptionMonster’s tracking systems detected unusual activity in the November 5 calls early in yesterday's session, with large blocks purchased for $0.30. More than 2,600 traded, above the open interest of 2,029 contracts and therefore indicating new positions.

Those calls lock in the price investors must pay to buy stock in the shale-energy company. The options can generate major leverage in the event of a rally but will also expire worthless if the stock fails to move.

Magnum Hunter shares rose 6.67 percent to $4 yesterday and is much closer to its 52-week lows than the highs, while short interest remains high at more than 25 percent of the float. The company is an independent oil and gas producer with high-potential projects in the Marcellus and Eagle Ford Shale areas, which could allow it to continue posting strong production and revenue growth.

Magnum Hunter typically trades only about 1,000 contracts, so yesterday’s total north of 3,300 really stood out. Calls outnumbered puts by more than 160 to 1, which also turned some heads because it’s so bullish.

—By CNBC Contributor Pete Najarian

Additional News: Turn Off Natural Gas Exports: Congressman

Additional Views: Chesapeake Outlook Is ‘Less and Less Plausible’: Analyst


Options Trading School:


Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC’s “Fast Money” and co-founder of OptionMonster.com. Najarian has no positions in Magnum Hunter.