Valero (NYSE:VLO) investor boosts near-term put volume


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After showing strength out of the gate, shares of Valero Energy Corp. (NYSE: VLO ) have dropped into the red during morning trading without any company-specific news on the wires, but options action on the tape suggests at least one investor could be betting the decline will not last much longer.

At 9:39 a.m. EST, roughly 3,900 out-of-the-money ( OTM ) July 16 puts changed hands for 23 cents per contract (the bid price when the volume hit the tape) versus current open interest of 1,000 contracts. This option action suggests investors initiated the majority of the action to open and were willing to cap maximum profits at the premium collected on these short put positions. If VLO shares are trading higher than $16 at July options expiration in 28 days, this investor could make a maximum profit of 23 cents per contract.

If VLO shares dip lower than $15.77 between now and July options expiration, this investor begins  to lose money and could continue to do so as the stock moves closer to zero. In the unlikely event that the stock drops to zero at July options expiration, maximum risk on this short put trade is $15.77, or the strike minus the premium collected. The July 16 puts have declined roughly two cents so far on the day, while VLO shares have dropped a fraction of a percent - stock down, puts down - that's a seller, folks.

It is possible that these investors tied a stock position to these short puts, but this article focuses only on the options volume on the tape. It's interesting that at least one investor expects VLO to hit a floor right around the stock's 52-week low of $15.29 during the next month.

VLO did not announce any news today to account for the stock's 14-cent decline to $17.81 so far on the day, but on June 14, rumors circulated that the company could be interested in Western Refining Inc. (NYSE: WNR ) . VLO has not announced its next earnings release, but the market expects the report around July 28.

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

This article appears in: Investing , Options
Referenced Symbols: OTM , VLO , WNR

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Karla Yeh

Karla Yeh

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