Pride International (PDE) roll-out bets on upside post-earnings


Pride International Inc. (NYSE: PDE ) shares are edging up on the day Monday without any notables news on the oil and gas name. One investor could be expecting even further upside during the next month and expressed that bet by rolling a long call position up and out.

PDE shares gained 17 cents to $24.81 as of 2:40 p.m EST. The company is due to announce earnings figures on July 29 before the market opens. Analysts estimate earnings of 32 cents a share. The July 27.5 calls and August 30 calls were active during the trading session today. Some contracts were traded to close while others were traded to open thanks to an investor who likely rolled out bullish positions.

At 11:08 a.m. EST, 9,000 front-month July 27.5 calls changed hands for 10 cents per contract (the bid price at the time of the trade). Simultaneously, a block of 9,000 August 30 calls crossed the tape for 25 cents per contract, which was the ask price when the volume hit the tape. Current open interest of the front-month options is 12,500 contracts while the back month options are home to current open interest of just eight contracts. This options action suggests an investor sold to close the July 27.5 calls and bought to open the August 30 calls for a net debit of 15 cents per contract. This investor is calling for PDE shares to be trading higher than $30.15 at August options expiration. This represents a 21% rally from the stock's current level. The open long call position will theoretically turn unlimited profits if the stock continues to the upside and is trading higher than the breakeven at expiration. If PDE shares are still trading below the strike price, the investor incurs a maximum loss of the premium paid per contract. It's interesting that this investor maintained long exposure in PDE and also expects even further upside during the near term.

Implied volatility of the August 30 calls is 45% compared to the stock's 30-day historical volatility of 62%. It looks like one investor expects the stock to climb higher and for volatility to kick in after PDE announces earnings figures in roughly three weeks.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Options

Referenced Stocks: PDE

Jud Pyle

Jud Pyle

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