Traders are keeping the faith in Anadarko Petroleum, even after a big selloff in recent months.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 4,560 January 2016 100 calls for $11.05 and the sale of 10,400 January 2016 120 calls for $4.85. Volume was slightly below open interest at the higher strike, so there are two possible explanations of the trade.
One is that the investor previously owned the 120s and moved the long calls to the lower strike, increasing leverage. The other, more likely explanation is that he or she owns shares and opened both positions as a new ratio spread .
In the latter case, the trader collects a credit of about $5,000, but the real profit--more than $9 million--comes if APC closes at $120 on expiration early 2016. Gains stop at that level, where the trader will be on the hook to deliver 584,000 shares.
APC fell 2.09 percent to $92.34 yesterday and is down 18 percent since the beginning of September. Yesterday's investor probably bought the stock when it traded at a higher price and used the ratio spread to earn additional money from a limited rebound. That would effectively lower the break-even point and eke out a profit even if APC remains under their initial entry.
Owning calls locks in a buying price while selling them forces them to deliver stock if a certain level is reached. (See our Education section for more on managing trades with options.)
Overall turnover exceeded 35,000 contracts in the name, roughly twice average amounts. Total calls outnumbered puts by almost 3 to 1.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
