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By David Russell

Denbury Resources (NYSE:DNR) has been moving sideways for almost a year, and now the bulls are looking for a rally.

optionMONSTER's Heat Seeker tracking system detected the purchase of about 2,900 April 17.50 calls for $0.20 to $0.23 and the sale of a matching number of April 15 puts for $0.75 to $0.80. Volume was more than four times open interest in both strikes.

DNR Chart

DNR rose 2.01 percent to $15.22 in morning trading. The oil and gas company gapped higher on March 1 after an upgrade by KeyBanc and its earnings report.

Today's options trade is designed to leverage a rally in the shares, which have been making incrementally higher lows since July. It generated a net credit of about $0.60 and will earn additional profits if DNR closes above $17.50 on expiration.

The strategy, known as a bullish risk reversal, mimics a long position in the stock and will lose money below $14.40.

The trade came after a stronger-than-expected employment report pushed energy prices higher. Oil appears to be on the verge of breaking free of the $70 and $80 range that has held it in check since October. The fact that support was at $70, which had been resistance between June and October, provides evidence a bullish uptrend is in place.

The trade on DNR pushed overall options volume in the stock to three times greater than average so far in today's session.

(Chart courtesy of tradeMONSTER)

Source: Bulls Are Betting on Denbury to Break Out