Options Trading News

August 28, 2012  Tue 11:28 AM CT


Volatility for Anadarko Petroleum has been dropping, and today’s big options trade looks for that trend to continue.

APC rose 0.58 percent to $69.17 in early afternoon trading. It has been in an increasingly tight range over the last month and is in the middle of the 52-eek high and low. The 30-ay historical volatility is down to 27 percent from near 50 percent six weeks ago. Ten-day price swings have abated to a 20 percent annualized rate. 

Dominating the options volume in the name is one print in the February 80 calls. A trader sold 12,000 of those calls for the bid price of $2.56. This was done against open interest of 237, so it was a new position.

Because options derive some of their value from volatility, selling calls or puts is a bet that it will drop or remain unchanged. Today's trade could be done naked, with an initial bearish bias, or may have been paired against long shares as a covered-call position. That would take a maximum profit if APC is at or above $80 at that expiration. See our Education Section for more.

The call sale accounted for almost two-thirds of the volume in today's session.

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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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