Resolute Energy Corporation (REN) is an oil and gas company that is engaged in the exploration and acquisition of oil and gas properties in the U.S. The stock is currently trading around $9.50 in a 52 week range of $7.41-$11.56. The stock has rallied over 16% this year and recent order flows in the options market lead us to believe there could be more upside in REN to come. Last week a trader bought 2,000 REN Nov 10 calls for $0.35. While this may not be a huge order, action in the U.S. gas and oil space has been indicating that traders expected significant upside in the industry. Most of the options action points to these stocks heading higher through the end of the year and we believe that REN sets up well here for a long term buy. We will look to use deep in the money calls as a stock replacement strategy. This allows a trader to use the inherent leverage of options to take a long view on REN in a much more capital efficient way than simply buying the stock.
Trade: Buying the REN Mar 7.5 Calls for $2.40
Risk: $240 per 1 lot
Reward: Unlimited
Breakeven: $9.90
