By David Russell of OptionMonster
NEW YORK -- Oil and gas names have been drawing attention, and now the bulls are targeting WPX Energy (WPX).
OptionMonster's trade scanners detected the purchase of about 10,000 March 20 calls for 70 cents to 83 cents on Wednesday, with the large blocks pricing at the very top of that range. This is clearly fresh buying, as open interest in the strike was just 179 contracts before the trades appeared.
These calls lock in the price where investors can buy a stock, letting them cheaply position for a rally with limited risk. The contracts provide the potential for huge leverage but will expire worthless if shares remain below $20 through mid-March.
WPX fell 1.3% to $19.03 on Wednesday and has been slowly working higher along its 200-day moving average. The natural-gas and oil producer peaked above $23 in November but then tanked on a weak earnings report. The money-losing company also trades for less than book value, which could make some investors think that it's a good buy at current levels.
Total option volume was 22 times greater than average in the session, according to the Heat Seeker. Calls outnumbered puts by a bullish 415-to-1 ratio.
Other energy stocks to draw upside trades recently include QEP Energy, Canadian Natural Resources, Callon Petroleum, and Emerald Oil.
Russell has no positions in WPX.