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Has Forest Oil Finally Bottomed?

By David Russell, reporter at OptionMonster

NEW YORK -- Bullish traders are piling into Forest Oil (FST) as the stock tries to bounce at its July lows.

OptionMonster's trade scanners Tuesday detected heavy buying in the December 8 calls, which totaled more than 4,200 contracts compared with previous open interest of just 105. Almost all the trades priced for 10 cents.

Those buyers locked in an $8 entry price in the oil stock for the next 4-1/2 weeks. The calls stand to generate big leverage if the shares rally but will expire worthless if the stock doesn't move.

Forest Oil fell 1.19% to $6.62 Tuesday but came off its lows as the calls hit. Last week the shares held the same $6 level where they bottomed over the summer, which could be leading some traders to believe that the stock is ready to rebound.

Total option volume was nine times greater than average in the session, with calls outnumbering puts by more than 7 to 1.

Russell has no positions in FST.

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.

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