Concho Resources has dropped to a key level, and one investor
apparently thinks that it may continue falling.
optionMONSTER's Depth Charge tracking system detected the purchase
of 1,700 January 75 puts for $2.40 and the sale of an equal number
of January 85 calls for $1.30. Volume was more than triple open
interest at both strikes.
The trade resulted in a cost of $1.10 and will profit from downside
in the Midland, Texas-based energy driller. It also obligates the
investor to sell shares for $85 if they reach that level and locks
in a minimum selling price of $75. He or she may own shares and be
using the strategy as a hedge, in which case it's known as a
. (See our
CXO is down 1.07 percent to $77.94 in morning trading and has lost
9 percent of its value in the last six months. It's now back around
the same level where it bounced in June and mid-2011, which could
be leading some chart watchers to expect a bounce or a big drop if
support is broken.
Total option volume is 4 times greater than average in the company
so far today, according to the Depth Charge.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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