Bulls Set Sights on Magnum Hunter

By Pete Najarian, co-founder of OptionMonster

NEW YORK -- Bears have been running the show at Magnum Hunter Resources ( MHR), but Wednesday the buying heated up.

OptionMonster's tracking systems detected unusual activity in the November 5 calls early in Wednesday's session, with large blocks purchased for 30 cents. More than 2,600 traded, above the open interest of 2,029 contracts and therefore indicating new positions.

Those calls lock in the price investors must pay to buy stock in the shale-energy company. The options can generate major leverage in the event of a rally but will also expire worthless if the stock fails to move.

Magnum Hunter's shares rose 6.67% to $4 Wednesday and are much closer to their 52-week lows than the highs, while short interest remains high at more than 25% of the float. The company is an independent oil and gas producer with high-potential projects in the Marcellus and Eagle Ford Shale areas, which could allow it to continue posting strong production and revenue growth.

The name typically trades only about 1,000 contracts, so Wednesday's total north of 3,300 really stood out. Calls outnumbered puts by more than 160 to 1, which also turned some heads because it's so bullish.

Najarian has no positions in MHR.

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.

More from Options

Amazon's Stock Is Facing a Major Test

Amazon's Stock Is Facing a Major Test

Here's a Better Way to Hedge Using Stock Options

Here's a Better Way to Hedge Using Stock Options

Let the Najarian Brothers Crash-Proof Your Portfolio

Let the Najarian Brothers Crash-Proof Your Portfolio

Let the Najarian Brothers Help You Generate Income With Options

Let the Najarian Brothers Help You Generate Income With Options

Learn Options Trading from the Najarian Brothers, the Best in the Business

Learn Options Trading from the Najarian Brothers, the Best in the Business