How High Will IO Go? -- Ion Geophysical (IO)
by Houghton and Atkeson 05/21/08
Ion Geophysical Corp. (IO) is a technology-focused seismic solutions company serving the global energy industry. It generates high-resolution images of the subsurface for oil and gas exploration.
With oil north of $130 per barrel, oil companies are falling all over themselves to find more. One wonders how high oil and IO will go.
Options investors began to express unusual interest in IO on May 7, when they sold more than 2,000 IO Jan 15 Puts (ZQOMC). The stock was trading at $15.16.
In many ways, the selling of puts is one of the most bullish options trades possible. If the stock drops, the financial pain is tremendous. If the stock stays flat or moves up, the return is essentially infinite.
Yesterday, it became clear that the option investors do not expect IO to stay flat. They purchased more than 1,000 IO Aug 17.50 Calls (IOTW) for about 80 cents. This call activity almost doubled the total number of all call contracts open in IO options.
Clearly, these option investors are acting with conviction. Adding to their conviction is our own observation that IO has just broken out above the $16.25 resistance level that has held the stock back for the past month.
For more fresh options trading ideas from Andrew and Nick, click here.
