MarkWest Energy Partners has dropped sharply with the rest of the energy sector, but traders are looking for a rebound in the next five weeks.
Nearly 5,000 January 62.50 calls were bought mostly for $2.55 but have traded up to $2.85 this morning, according to optionMONSTER's Heat Seeker tracking program. Open interest in the strike was a mere 13 contracts before the trades appeared, showing that this is fresh buying.
These long calls lock in the price where the stock can be purchased through mid- 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 in mid-January if shares remain below $62.50. (See our Education section)
MWE is up 0.65 percent to $62.13 today. The natural-gas storage and transportation operator plunged from the $70 level this week and broke below its 200-day moving average, and today it came within $1 of its 52-week low of $58.62 reached in May.
Total option volume in the name tops 6,100 contracts so far today, already 6 times its full-session average for the last month. Overall calls outnumber puts by a bullish 20-to-1 ratio.
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