A large trader apparently believes that the pain will stop soon
for Resolute Energy.
optionMONSTER's tracking programs detected the sale of 8,300 June
10 puts for $2.50 and the purchase of an equal number of March 10
puts for the same price. A similar trade occurred in the September
12.50 puts and the March 12.50 puts, with 10,000 contracts at each
strike pricing for $5 each. Volume was below open interest in both
the March 10s and the March 12.50s, so it appears that existing
short positions were rolled forward in time.
The trader almost certainly
wrote a large number of puts
in the oil and gas driller some time ago when it was trading much
higher. He or she probably wanted to collect income from the sale
of those options, hoping that REN would remain above the strike
prices. But then the stock fell, leaving the puts
in the money
and those bets underwater. (See our
The trader was then on the hook to buy shares for $10 and $12.50 on
expiration at the end of this week. Yesterday's adjustment provides
more time for a rebound to occur, and losses will diminish if the
shares do push higher.
REN fell 1.82 percent to $7.55 yesterday. The stock slid after
peaking above $18 in early 2011, but it has been holding ground
around its current price for almost two years. The company has
struggled with pipeline problems at its Aneth field in Colorado and
Utah but has continued to develop other properties in the meantime.
Short interest surpassed 20 percent in the company at the end of
last month, which could draw buyers to the name as long as support
Total option volume in Resolute was more than 300 times greater
than average in yesterday's session.
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