By David Russell
Options volume surged 115-fold in Atlas Energy (ATN) yesterday as a trader took a bullish position in the upward-trending natural-gas stock.
The transaction included the purchase of 5,000 June 35 calls for $1.50 and the sale of 5,000 June 30 puts for $1.70. The trader could earn potentially infinite gains if the stock closes above $35 by expiration.
ATLS rose 0.59 percent to $32.27 yesterday and is up 24 percent in the last three months. The company, which focuses on the emerging shale gas sector, is scheduled to release earnings after the bell today.
The shares have been rallying as the company merged with a former subsidiary and despite a weak EBITDA forecast in November. They appear to be finding support at the $32 level that had served as resistance since October, suggesting that the uptrend remains in place.
Yesterday's option trade, known as a bullish risk reversal or "synthetic long," uses the premium from selling puts to help pay for the calls. The strategy, which is similar to owning the stock, exposes the investor to losses if ATLS falls below $30.
The trade accounted for 95 percent of the options volume in the name yesterday.
(Chart courtesy of tradeMONSTER)