Concho Resources has been trapped at resistance, and one
investor is positioning for a drop.
optionMONSTER's Depth Charge monitoring program detected the
purchase of 1,600 October 90 puts for $3.06 and the sale of an
equal number of December 100 calls for $3.97. The volume was above
the open interest in each strike at the start of the session,
indicating new activity.
The investor collected a credit of $0.91 and now stands to profit
from a decline in the oil company's share price in the next five
weeks. He or she is also on the hook to sell shares for $100 if
they close above that level during the two following months.
CXO is down 1.32 percent to $91.99 in early afternoon trading and
has been unable to break above its 200-day moving average. The
stock has also lagged the broader energy sector since June, which
could be leading some investors to believe that it will remain
Today's trade is probably the work of an investor who owns shares
and wants to hedge that position. It's similar to a
but uses the
greater time value
of the longer-dated December contracts to earn premium. That money
is then used to buy puts that are
closer to the money
but expire sooner. (See our
section for more on how calls and puts can be used to manage risk.)
Overall option volume in CXO is 5 times greater than average so far
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