Bulls Look for Rebound in Noble

By Mike Yamamoto of OptionMonster

NEW YORK -- Energy names have been under pressure recently, but Wednesday the bulls were piling into offshore driller Noble (NE) . 

Our scanners detected the purchase of 11,829 October 29 calls in one print for the ask price of 26 cents, as noted by OptionMonster co-founder Jon "DRJ" Najarian on CNBC's "Fast Money" Wednesday night. Open interest in the strike was just 2,041 contracts before the trade appeared, showing that it is a new position.

These long calls lock in the price where the stock can be purchased through mid-October no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $29.

NE rose 0.82% to $26.92 on Wednesday, closing just 2 cents off its session high.

On Sept. 3 hedge fund Fir Tree reported that it had raised its stake in the company to 9.6% from 5.7%, saying it was looking for ways to boost its "undervalued" stock, and Bloomberg reported that one possibility was the creation of a master-limited partnership. Noble then fell along with many other energy names as oil prices fell, but it is now trying to hold support at current levels.

Wednesday's total volume in Noble was more than quadruple its daily average for the last month. Overall calls outnumbered puts by a highly bullish 30-to-1 ratio.

Najarian is long NE calls and shares; Yamamoto has no positions in the name.

 

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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