Big Upside Bet on Endeavour International

By Chris McKhann of OptionMonster

NEW YORK -- Endeavour International (END) saw huge call-buying as the oil and gas company surged Monday, bucking the broader-market selloff.

A trader purchased 40,000 September 5 calls at the $1.30 ask price, followed by subsequent blocks for $1.25 to $1.50, according to OptionMonster's tracking system. This is clearly fresh buying, as the volume was more than 1,700 times the previous open interest at the strike.

These calls lock in the price where a stock can be purchased through mid-September no matter how far it might climb. They could be sold at a profit if premiums rise with a rally before then, but the contracts could expire worthless if shares drop significantly.

Endeavour shares rose 5.35% to $5.12 on Monday, jumping after the calls hit. The options are pricing in a big move as the company tries to hold its 200-day moving average.

Total option volume in the name topped 48,500 contracts, 30 times its daily average for the last month. Overall calls outnumbered puts by a bullish 17-to-1 ratio.

McKhann has no positions in END.

 

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.

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