NEW YORK -- Option traders turned bullish on Continental Resources (CLR) - Get Continental Resources, Inc. Report and Anadarko Petroleum (APC) - Get Anadarko Petroleum Corporation Report on Tuesday as the two oil drillers tried to fight back from their recent selloffs.
Continental lit up OptionMonster's Heat Seeker system first, with about 7,700 March 50 calls purchased for 25 cents to 35 cents. Anadarko followed minutes later as traders snapped up about 4,600 March 90 calls for 28 cents. Volume was above the previous open interest in both strikes, which means new money was put to work.
Long calls lock in the price where investors can buy stock, which lets them position for rallies with limited risk. The relatively low cost of the options can also result in significant leverage if shares move in the right direction.
Energy names have been a tough trade for both bulls and bears recently with fluctuations in the price of crude, but Tuesday's call buyers were using inexpensive contracts in hope of a quick spike higher.
Continental rose 2.13% to $43.61 on Tuesday, and Anadarko ended the session up 0.93% to $82.78. Both companies bottomed in mid-December and rebounded in the next two months.
Total option volume was almost five times greater than average in APC and triple normal amounts in CLR. Calls outnumbered puts by wide margins in both names.
-- Written by Mike Yamamoto of OptionMonster
Yamamoto has no positions in CLR or APC