Looking at the July 45 calls in Fluor Corp (NYSE: FLR, Stock Forum), we find that they traded more than 5,000 times yesterday versus open interest of 2,455. We also find that the July 55 calls traded more than 5,000 times versus an open interest of 1,033. What is interesting about this call activity is that it was a bullish call spread and it gives one look into a way to take advantage of potential upside in FLR.
FLR reached a 52-week low on November 21 of $28.60. Now yesterday, with the stock having rallied back up to around $37.90, an investor purchased the July 45-55 call spread for around $2.25. That means the investor bought the 45 calls and sold the farther out-of-the-money 55 calls. If FLR is above 55 at July expiration, the investor will attain his or her max profit of $7.75.
FLR is in the business of providing construction for oil pipelines. As the price of oil has stabilized and begun to rally, FLR has moved higher along with it. What is notable about this call spread is that by purchasing a spread rather than just the 45 calls, the investor gets to spend less in return for capping his upside.
This bullish activity in FLR is similar to other bullish activity we have seen in PetroBras (NYSE: PBR, Stock Forum) and ConocoPhilips (NYSE: COP, Stock Forum) during the past few weeks. After seeing their shares decline precipitously since last summer, many companies that profit from the energy and base material sectors have started to stabilize and see some bullish trends in their shares.
Jud Pyle is the Chief Investment Strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Options Alerts “Click here for a free trial for Options Alerts.”