Oil spill spurs activity across sector

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Option volume surged in stocks such as Tidewater and Halliburton today as investors attempted to judge the impact of oil spill in the Gulf of Mexico.

optionMONSTER's Heat Seeker tracking system detected the purchase of more than 3,700 May 55 calls on TDW for $2.10 against open interest of 706 contracts. The transactions occurred mostly in the first hour of trading, when the shares were up 3.4 percent.

TDW Chart Since then the gains have moderated and the stock is up 1.7 percent to $53.94 in afternoon trading. Earlier in the session TDW touched a 19-month high of $57.08.

The surge of buying occurred after winds drove leaked oil toward the Louisiana shore. Traders are apparently betting that the cleanup will spur demand for TDW's services, which include transportation, towing, and anchoring offshore platforms.

The crude is leaking from a rig called Deepwater Horizon, which sank last week after a fatal explosion. The platform was owned by Transocean and contracted to BP and Anadarko Petroleum. BP is expected to bear most of the cleanup costs.

BP fell 0.23 percent to $52.42 in afternoon trading and is down 12 percent in the last week on the news. Today an investor apparently thought the selling was overdone and placed a large upside trade using the January 60 and January 70 calls. (Hear more on today's Trading & Abetting)

HAL, the oil-service giant that worked on the rig, also fell on concern it would be forced to pay some of the cleanup cost. Overall options volume in the name was more than three times average, though most of the activity resulted from investors selling calls and puts, likely betting that volatility on the stock had climbed too high.

Plains Exploration & Production, which also owns properties in the Gulf of Mexico, faced outright bearish trades. The stock fell 4.53 percent to $29.31 and is down 15 percent in the last week.

Option traders piled into the May 27 puts for $0.75 to $0.80, pushing volume to 3,566 against open interest of 807. Almost 3,100 May 30 calls were also bought, though volume came against open interest. Given the heavy turnover in PXP, the purchases might not be bullish because they could have resulted from investors buying back options that had been sold as part of a covered call strategy. (See our Education section)

In another noteworthy trade, 2,000 June 15 puts were sold on Energy XXI for $0.74. The transaction occurred after the exploration and production company snapped back from a three-month low of $15.88. EXXI had gapped higher on Jan. 11, and appears to be holding that gap, which some chart watchers may consider a bullish pattern.

Overall options volume in the oil and gas sector is running about 79 percent greater than average so far today, making it the third-busiest industry on our monitors.

(Chart courtesy of tradeMONSTER)



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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: APC , BP , EXXI , HAL , PXP , RIG , TDW

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