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TheStreet Open House

Bulls Clean Up Fast in Murphy Oil

By David Russell of OptionMonster
 
NEW YORK -- Murphy Oil (MUR) bounced at the end of last week, and option traders cleaned up in a hurry.
 
OptionMonster's tracking programs detected unusual activity in the Arkansas-based energy company a little more than an hour into Friday's session. Large blocks traded first in the February 62.50 calls for 15 cents and then in the March 62.50s for 25 cents.
 
These calls lock in the price where a stock can be purchased, letting investors cheaply control a move to the upside. They can also generate massive leverage, which is exactly what happened in this case.
 
Murphy's shares started to climb as the trades piled up. The stock continued to advance throughout the session and ended the day higher by 3.69% to $57.93, but that was nothing compared with the options: The February calls more than quadrupled to 73 cents, and the March contracts rose all the way to $1.40. They traded more than 8,000 and 4,600 respectively, well above the previous open interest at each strike.
 
The stock tanked on a poor earnings report last month but found support around the same $55 level where it bounced in November 2012.
 
Calls outnumbered puts by a bullish 4-to-1 ratio on Friday, and total option volume was 37 times normal levels.
 
Russell has no positions in MUR.

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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