We love unusual call buys in small, thinly traded stocks, and LRR Energy LP (LRE) is a perfect example. Today we saw a trader nibble up 1,646 of the February $20 calls in LRE. The trader paid 15 to 19 cents for these calls.
The common shares of LRR Energy LP (LRE) are very interesting in their own right, as they currently yield about 10.5%. An additional bonus is that they company just announced they are raising the quarterly dividend a penny, to 50 cents on the next distribution.
But when you see a trader gobble up 1600 plus contracts for February in a super thinly traded issue like this, we like it even more.
LRR Energy LP (LRE) is up 25 cents today, to $18.89, with most of the gains coming after the unusual call buy. LRE hit a new 52 week high two days ago on the announcement of the dividend increase.
As is often the case, this call buy could be a result of leaked earnings data. The company is scheduled to report on July 31, 2014. You know how we feel about earnings, it’s a crap shoot, but we find this unusual option trade in this small little company compelling. It’s worth a shot.
And we’re not the only ones. The calls have now traded 2,750 contracts and it’s up to 24 cents, with the bid at 20 and the ask at 30 cents. Seems it’s seen a few other traders jump on this bandwagon. All aboard!
Of course it could be that an analyst upgrade has leaked before the news. LRR Energy LP (LRE) is already rated an OVERWEIGHT holding, but has a price target of just $18.44. Could be that a firm is about to announce an price target increase?
We are locked and loaded and hoping for some good news.