By Jud Pyle, CFA, chief investment strategist for the Options News NetworkLooking at the April 40 calls in ConocoPhillips ( COP), we find that they have traded more than 39,000 times so far today vs. current open interest of 2,452 for an average price of around $1.36. What is interesting about this call activity is that most of the activity is from buyers of the options.
An out-of-the-money call option should never rise more than the stock does unless implied volatility rises. This buying activity is similar to other buying activity that I have written about in this column over the past couple of weeks. For example, last week we talked about call buying in Hewlett-Packard ( HPQ). Like COP, the call-buying there was in a stock that had slid, and the breakevens on the call purchase only needed the stock to retrace ground that it had lost in the prior few days. As the market continues to plumb new lows not seen since 1997, this type of bottom-fishing in call options might continue as investors wait for some semblance of a rebound. Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.