By Jud Pyle, CFA, chief investment strategist for the Options News Network
The number of
options traded has more than doubled today, thanks to one bullish investor whose put sale trumped normal daily options volume by approximately 12,000 contracts.
More than 50,000 HAL options have changed hands today, compared to normal daily options volume of 23,000 contracts. The bulk of the volume traded in the January 2010 expiration month after an investor sold 35,000 in-the-money Jan. 22 puts for $4.45 per contract with the stock trading around $19 a share. The Jan. 22 puts, which are currently trading down 20 cents on the day, are home to current open interest of 1,719 contracts. More than 36,400 of the Jan. 22 puts have changed hands already today, with more than two hours left to go in the trading day.
HAL did not announce any significant news today that could have instigated heavy put selling activity. HAL shares could be rallying despite a drop in crude oil prices today because of expectations for a better-than-expected earnings season, especially for stocks with above-average exposure to outperforming international markets. The company is scheduled to announce earnings figures on July 20, the trading day after July expiration.
HAL shares are currently trading up 30 cents to $19.23 -- that's 43% higher since reaching a 52-week low of $13.46 on Nov. 20, but 63% from the 52-week high of $53.07 it saw on June 30 last year.
The investor needs HAL shares to expire higher than $17.55 in order to make money on this trade ($17.55 is the breakeven point). Bullish investors do not necessarily want a big rally - they just need the stock to at least hold its current level. Given that this put sell was relatively long term and using in-the-money options, it is a little unusual but still points to moderate bullish sentiment from the investor.
Investors should not interpret heavy put selling as a reason to automatically buy HAL shares, which are currently outperforming the market. But investors who are bearish on HAL have a healthy supply of Jan. 22-strike puts on their hands today.
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Bullish Put Activity in Halliburton
Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."