The market is pricing in a potential collapse for Harvest Natural Resources.
Our Depth Charge tracking system detected the purchase of 6,800 July 5 puts for $0.60 to $0.65, reflecting a belief that the move will be to the downside. Volume was more than 9 times open interest in the strike.
Implied volatility in the oil company exceeds 140 percent, more than twice the company's historical volatility of 65 percent. That means investors are willing to pay more for options, expecting a huge move from the oil driller. (See our Education section)
HNR rose 0.73 percent to $5.53 yesterday and has lost about half its value in the last year. In addition to the normal economic sensitivity of all energy stocks, the company has an added layer of risk because it operates in Venezuela, where left-leaning leader Hugo Chavez is leading in the polls ahead of elections on Oct. 7.
Overall option volume in HNR was 10 times greater than average yesterday, with puts accounting for 85 percent of the activity.
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