Oasis lives up to its name for bulls

Oas66

Energy producers have been tough to trade with the erratic swings in oil, but Oasis Petroleum has been quietly coming back to life in recent days.

Last Wednesday, Investitute’s proprietary programs identified the purchase of 1,900 June $10 calls for $0.25 to $0.35 with shares at $9.73. Volume was well above the strike’s open interest of  562 contracts, indicating that this was fresh buying.

Those calls sold for $0.52 this afternoon, roughly doubling in value less than a week later. The stock rose just 5 percent in the same time frame, underscoring how far options can outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. 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.

OAS gained 4.41 percent today to close at $10.19. The oil and natural-gas company has been grinding higher since falling to $9.25 on the day that those June calls were opened.

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Mike Yamamoto

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