By David Russell of OptionMonster
NEW YORK -- NiSource (NI) has been trending higher, and the bulls piled into the natural-gas stock on Friday.
OptionMonster's tracking programs detected the purchase of 5,500 October 40 calls for 65 cents to $1.25. More than 2,300 October 39 calls were also snapped up, mostly for $1.45. Volume exceeded the previous open interest in each strikes, which indicates that new money was put to work.
Long calls lock in the price where investors can buy the stock no matter how far it might rise. That lets them ride a rally at limited cost and, because only the price of the options can be lost, it also reduces losses in the event of a drop.
NiSource shares rallied as the trades hit and ended Friday's session up 1.35% to $39.76. The stock has climbed steadily since the broader market bottomed in 2009, and it is now attempting to bounce once again at its 50-day moving average.
Total option volume in the name was 19 times greater than average on Friday, with calls outnumbering puts by a bullish 49-to-1 ratio.
Russell has no positions in NI.