This post is for education purposes only and should not be interpreted as a trade recommendation. Options trading may not be suitable for all investors.
Energy stocks have been on fire this month, and yesterday bulls piled into a beaten-down oil driller.
Upside options activity swelled in Devon Energy (DVN). Traders started amassing the October 40 calls for $2.12 less than an hour after the opening bell. They kept buying bigger chunks into early afternoon, mostly for $2.25. By the time it was all said and done, over 16,000 contracts had changed hands.
Calls fix the price where a security can be purchased, so they tend to appreciate when shares rally. Traders use them to leverage a rally, but they can also expire worthless the stock remains below the strike price. See our Knowledge Center for more.
DVN slid 1.14 percent to $35.69 yesterday, but the previous session it had its biggest gain in over a year — also amid heavy call volume. The company’s lagged the broader energy sector by a wide margin for the last year because of weak production. Management’s responded with planned asset sales, layoffs and share buybacks. This week’s options activity may reflect hopes that further news will be forthcoming.
Calls outnumbered puts by a bullish 8-to-1 ratio on Thursday. Almost 42,000 contracts changed hands in total — triple the monthly average.