OptionsHouse

Options Trading News

September 12, 2013  Thu 12:20 PM CT

CXO: SEE CHART GET CHAIN FIND STRATEGIES
Traders apparently don't want to give up their gains in Concho Resources now that the Texas energy stock has made a nice move.

optionMONSTER's Depth Charge tracking program detected the purchase of 1,880 October 100 puts for $1.93 and the sale of an equal number of October 95 puts for $0.73. Volume was below open interest in the 95s, so there are two possible explanations for the activity.

One is that the investor previously owned puts at the lower strike to protect a long position in the shares and has now rolled it up. Alternatively, both halves of the trade may have been opened, in which case the trade is a vertical spread that will earn profit of 317 percent on a drop to $95 or lower by expiration.

Either way, the position cost $1.20 to open and stands to profit to the downside. (See our Education section for more on how to use options as hedging instruments.)

CXO is up 1.47 percent to $104.66 in afternoon trading and has risen 21 percent in the last three months. The company focuses on the Permian Basin in west Texas and eastern New Mexico, and it expects production growth to accelerate to 12 percent annually in coming years versus a 7 percent rate since 2007.

It's been running along with other domestic energy companies as investors grow increasingly enthusiastic about a renaissance in energy production within the United States. (See our researchLAB market scanner for more.)

Total option volume in CXO is triple the daily average so far today, according to Depth Charge. Puts outnumber calls by almost 2 to 1.
Share this article with your friends


Related Stories

CXO

Is Concho Resources headed lower?

January 12, 2016

Traders are positioning for more potential declines in the oil and natural-gas producer, which has fallen 29 percent in the last three months.

OptionsHouse

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »