Unusual Options Activity: Comstock Resources (CRK)

Oil and gas exploration company Comstock Resources (CRK) is down by nearly a third over the past year, amid a decline in energy prices. One trader sees shares rallying higher in the coming weeks.

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  • That’s based on the October $13 calls. With 44 days until expiration, 18,969 contracts traded compared to a prior open interest 585, for a 32-fold rise in volume on the trade. The buyer of the calls paid $0.55 to make the bullish bet.

    Shares recently traded just over $12, so they’d need to rise about 6 percent for the option to move in-the-money. Comstock has a 52-week high just under $22, so there’s plenty of room for a run higher.

    Comstock has seen revenues drop nearly 70 percent over the past year, although shares aren’t hugely expensive at 14 times forward earnings.

    Action to take: Investors betting on oil and gas going into the latter part of the year will likely be rewarded given the drop this year. Oil prices have been trending back over $80 per barrel in recent sessions. Natural gas tends to rise in the winter months.

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  • Investors can also get a 4.2 percent dividend at today’s prices.

    For traders, the October calls could play out well in the coming weeks, and are inexpensive enough to deliver mid-double-digit gains on a move higher in shares.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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