Market News

December 1, 2016  Thu 7:16 AM CT

Even after the energy sector's big rally yesterday, apparently not everyone is convinced that all oil stocks will go to the moon.

For example, one large trader is betting that near-term gains will be limited in Weatherford. The oilfield-services provider spiked higher along with many other energy names yesterday on news that OPEC members have agreed on production cuts--a move that led to massive short-covering, as many investors had bet against on such a move amid increasing skepticism in recent days.

WFT rose 18.29 percent to $5.11 yesterday but is down 21 percent in the last three months, and one large trader apparently believes that the stock may be getting ahead of itself. Our systems detected the sale of 15,000 December 5.50 in one print for $0.15 yesterday in what was clearly a new position, as open interest in the strike was only 340 contracts before the trade appeared.

Short calls generate income and lock in the price where a stock must be sold. The trade is usually done in conjunction with long shares in a covered-call strategy, reflecting a belief that gains will be limited through expiration. (See our Education section)

The overall strength in the sector was reflected clearly on our proprietary ResearchLab market scanner yesterday, as four of the five leading groups came from energy in the screen shot below:

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