This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bulls Want to Run With SM Energy

By David Russell, reporter at OptionMonster

NEW YORK -- The bulls want to run with SM Energy (SM).

OptionMonster's tracking systems detected a giant upside trade in the wildcat oil company, which operates in Texas, Louisiana, and the Rockies. It entailed the purchase of 10,000 November 55 calls for $4.05, while equal-sized blocks were sold in the November 70 calls for $1.10 and the November 35 puts for $1.80. Volume was more than triple open interest in all three strikes.

Buying calls lock in the purchase price for a stock, while selling calls fixes the exit level. Selling puts obligates the investor to buy shares if they fall to the strike price or below.

As a result, the investor paid $1.15 to enter the position. He will collect $15 if SM rallied back to $70, representing a profit of more than 1,200%. In addition to the initial outlay, the trader also stands to lose money on the short puts if the stock falls below $35.

SM rose 7.16% to $49.11 on Friday but came into the session down by more than one-third during the preceding three months. Most energy stocks have been hammered in that time amid worries of financial contagion from Europe and a slow recovery in China. That sentiment has improved markedly in the last week as investors jump into beaten-down names in the sector.

Friday's bullish trade in SM pushed total option volume in the stock to 24 times greater than average.

Russell has no positions in SM.
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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.03 -2.90%
FB $116.73 7.20%
GOOG $691.02 -2.10%
TSLA $247.54 -1.60%
YHOO $36.59 -0.97%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports