By Mike Yamamoto of OptionMonster
NEQW YORK -- Energy was strong Monday, and the bulls were looking for a pop in ocean driller Ensco (ESV).
OptionMonster's tracking systems showed that more than 11,000 May 52.50 calls were bought, mostly for 50 cents to 60 cents. That was well above the previous open interest of 498 contracts, so new money was clearly put to work.
These long calls lock in the price where the stock can be purchased through mid-May no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $52.50.
Ensco shares have been bouncing in a range for the last three months and Monday rose 3.79% to close at $50.43. Earnings will be released on April 29 before the market opens, so the May calls will let the investor profit from a strong report.
Total option volume in the name Monday was five times its daily average for the last month. Overall calls outnumbered puts by more than 10 to 1, a reflection of the session's bullish sentiment.
Yamamoto has no positions in ESV.