MarkWest Energy is down big, and one trader made a killing from the drop.
optionMONSTER's tracking programs detected the sale of 3,048 November 95 puts for $46.60. That block exactly matched previous open interest, which indicates an existing downside position was closed.
He or she probably bought the contracts when the pipeline operator was much higher and is now sitting on huge profits. It works because puts lock in the price where shares can be sold, giving them an inverse correlation to the stock. Their relatively cheap cost can also produce significant leverage on a percentage basis. (See our Coaching section)
MWE is up 0.15 percent to $46.58 in afternoon trading. It peaked around $70 as late as July, only to decline sharply along with the rest of the energy sector. Sentiment in the group appears to be brightening more recently, however, giving our premium subscribers winning trades in companies like Phillips 66, U.S. Silica , and Chevron .
MWE usually sees volume of just 1,100 contracts in a day, so today's closing transaction pushed its total well above average. Investors may also think downside is limited because its dividend yield is over 8 percent and shares hit their lowest level in almost five year.
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.
