Complex upside strategy in Oil States
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring system detected the purchase of some 5,000 September 105 calls for about $3.42. Matching numbers of contracts were sold in the September 85 puts for $2.25 and the September 115 calls for about $1.17. Volume was more than twice the previous open interest at all three strikes, indicating new activity.
Selling more options than were bought reduced the cost basis of the trade essentially to zero. The investor now stands to earn $10 if OIS rallies to $115 by expiration but will be forced to buy the stock for $85 if it falls below that level. (See our Education section for other ideas on how to craft bullish and bearish strategies with options.)
OIS is up 0.15 percent to $96.78 in afternoon trading. The stock exploded higher in late April after activist investor Jana Partners reported that it owned 9 percent stake of the outstanding shares. The company has established a niche of housing oil-field workers, as well provides well-site services and manufactures subsea pipelines.
Shares peaked around $85 in 2011 and 2012 before breaking out earlier this year. That could make some chart watchers expect support around the same level now, helping explain today's complex strategy.
The energy sector is down the least today despite the well despite the S&P 500 being down more than 1 percent, according to our researchLAB market scanner.
Total option volume in OIS is 11 times greater than average so far in the session.