NEW YORK -- Traders are turning bullish on McDermott (MDR) ahead of its earnings release next week.
OptionMonster's Heat Seeker system detected the purchase of 3,300 May 6 calls for 15 cents to 20 cents on Monday. Volume was more than twice the previous open interest in the strike, which means that new money was at work in the trades.
Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.
McDermott rose 2.86% to $5.39 on Monday even as the energy sector pulled back. The oilfield-services company is above all its major moving averages and trying to break through its year-to-date high of $5.59 reached in mid-April. The stock gapped higher after its last set of quarterly numbers in early March and is due to report again next Monday, May 11, five sessions before Monday's long calls expire.
Total option volume in the name Monday was triple its daily average for the last month. Overall calls outnumbered puts by a bullish 19-to-1 ratio.
-- Written by Mike Yamamoto of OptionMonsterYamamoto has no positions in the stocks mentioned.