Bullish Move on Massey Energy

CHICAGO (TheStreet) -- Massey Energy(MEE Quote) did not report any notable news Monday, but at least one option investor has taken an interest in a later-dated call series, taking a bullish stance on the coal producer.

The out-of-the-money April 45 calls have traded more than 7,800 times today versus current open interest of just 307 contracts, suggesting that these calls were traded to open. An investor bought 7,400 of these calls for around $2.75 when the stock was trading at $37.50 a share.

This means investors who bought these calls need MEE shares to expire higher than $47.75 to make money. Note that the investor is calling for approximately 26% of upside come April expiration. If the stock pops before options expiration, investors could sell the calls and take profits.

The April 45 calls have a delta of approximately 37, meaning for every dollar move in the underlying, these options should change by 37 cents -- moving lower as the stock drops and higher as the stock rallies. Given that MEE is currently higher by $1.67 to $37.70, these calls should be up around 62 cents, but the call-buying activity pushed the price higher than the delta would suggest. The options are currently trading up 65 cents.

Normal daily option volume in MEE is approximately 7,000 contracts per day, so today's activity isn't entirely out of the ordinary. But it is interesting that investors are buying out-of-the-money calls in anticipation of even more upside when the stock is now trading at a new 52-week high.

-- Written by Jud Pyle in Chicago

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