Volatility strategy targets Anadarko

By David Russell,

Shutterstock photo

One investor thinks that Anadarko Petroleum is in for a bumpy ride.

optionMONSTER's monitoring systems detected the purchase of 30,000 January 80 calls for $3.50. Barely one minute later, a block of 1.2 million shares was sold, indicating the use of a so-called delta-neutral trade.

Being long calls and short stock offset each other, making them agnostic on the share price. Instead, the trader wants volatility to increase, which would drive up the value of the calls.

The strategy normally employs out-of-the money options with several months until expiration because they're more sensitive to changes in volatility. (See our Education section)

Implied volatility in the oil driller has started to rebound from long-term lows and now stands at 30 percent. APC closed Friday at $75.59, up 2.02 percent.

Almost 120,000 contracts traded in the name, roughly 10 times their typical amount.

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

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

This article appears in: Investing Options
Referenced Stocks: APC

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