NEW YORK -- Stone Energy (SGY) came out of nowhere this week, and the bulls have cleaned up already.
OptionMonster's tracking systems detected a large upside trade in the Gulf Coast driller Thursday: 2,000 March 33 calls bought for $1.74 and an equal number of March 30 puts sold for 94 cents. Volume was more than eight times the previous open interest in each strike, indicating that new positions were initiated.
Owning calls locks in the price where the investor can buy shares, while selling puts helps offset the cost but obligates him or her to get long if the stock drops. The position is highly bullish, providing potentially huge leverage to a small movement in the underlying shares. If the trader gets the direction right, the profits can be quick and extreme, which was exactly the case in Stone Energy on Thursday.
Stone's shares climbed 5.52% Thursday to close at $34.61, but the value of the option position almost tripled from 80 cents to $2.20. The stock rallied sharply from last April through October, then pulled back and is now bouncing above its 200-day moving average.
Our scanners also identified heavy buying in the February 33 calls on Tuesday for 25 cents to 45 cents. Those contracts shot up to $2.15 by the end of Thursday's session. Stone traded barely 100 option contracts per day as late as Monday, but volume topped 13,600 Thursday.
Other names in the sector with unusual activity in the last week include Halcon Resources, Superior Energy Services, and National Oilwell Varco.
Russell has no positions in SGY.