RPC Call-Buyers Leverage Big Gains

By David Russell, reporter at OptionMonster

NEW YORK (OptionMonster) -- RPC (RES) flew a bullish flag last week, and the bulls are saluting.

OptionMonster's real-time systems detected a surge of call buying in the oil-service stock Tuesday, with about 2,300 February 22.50s purchased for 55 cents to 65 cents. Volume was 10 times open interest in the strike.

These long calls lock in an entry price investors must pay for the stock and therefore can provide major leverage against the underlying shares. In fact, that's exactly what happened Tuesday.

RPC was trading for about $19.46, up almost 7%, when the calls changed hands. It continued higher throughout the session and closed 12% higher at $20.51.

The calls, however, translated that same move into a gain of 60% to 90% gain, fetching $1.05 in the afternoon.

Overall option volume was 14 times greater than average Tuesday, with calls outnumbering puts by a bullish 27-to-1 ratio.

Russell has no positions in RES.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.