Complex hedge in Noble Energy
Chris McKhann | [email protected]
optionMONSTER systems show that a trader bought 2,296 June 115 puts for $3.18 and sold the same number of June 105 puts for $0.66 and June 120 calls for $2.07. The volume at all three strikes was multiples of previous open interest, clearly indicating new positions.
This combination trade is looking for NBL to be down to or below $105 by expiration in mid-June. It cost just $0.45 to open, which is the potential loss if NBL is between $115 and $120 at expiration. The maximum gain would be realized with the stock at or below $105, while the trader would be effectively short the shares if they rise above $120.
This could well be a strategy known as a put spread collar. That would be protection against a long position in the NBL shares, but only provides a hedge down to that $105 price. (See our Education section)
NBL is down 0.63 percent to $116.16 this morning. Yesterday's close was the highest for the oil and natural-gas company since the stock reached $117.96 on April 11. Share dipped to the $105 support level in the next week.
optionMONSTER systems show that 8,239 NBL options have changed hands, compared to its daily average of 1,200 in the last month.