OptionMonster's tracking programs detected the purchase of 20,000 October 11 calls for 40 cents barely half an hour after the opening bell. An equal number of October 10 puts was sold at the same time for 2 cents, lowering the net cost of the calls to just 2 cents.
Owning calls locks in the price where investors can buy the Calgary-based oil-and-gas stock. Selling the puts generated income and obligates them to buy shares for $10 if they go under that level by expiration. Combining the two strategies is highly bullish, with major leverage in both directions.
TLM did move higher quickly, and the trade was generating big gains by the afternoon. The stock rose as much as 4% but then eased back to close at $10.76, still up 2.57%.
The options moved even more dramatically: The October 11 calls shot up to 75 cents, and the overall position appreciated to about 25 cents. Total option volume was 26 times greater than average in the session.
Talisman gapped higher last month after being approached for a takeover by Repsol and counts billionaire investor Carl Icahn among its major shareholders.
Russell has no positions in TLM.