) -- Investors looking to buy call options in
have a plentiful supply thanks to at least one call seller boosting later-dated option volume a couple weeks before the company's earnings.
More than 6,700 July 35 calls have crossed the tape versus current open interest of 473 contracts, meaning investors traded these options to open. The calls are currently up five cents on the day to $1.25 per contract with the stock up 15 cents to $29.55, computing to an implied volatility of 39. This compares to a 30-day historical volatility of 30.
Investors who are short these calls are expecting the stock to hit a ceiling around $36.25 and close below that level by July options expiration. This call sale could also have been initiated by someone who owns shares of the stock. They could be selling these calls to collect some income on a bet that the shares will not go higher than the $36.25 level.
PDE shares reached a 52-week high in October of roughly $34, and the stock has sold off roughly 25% since then. The call-selling action we saw today is a moderately bearish play on the oil and gas drilling company because the stock could climb 22% throughout the next six months and the call option sale would remain profitable.
PDE is scheduled to announce earnings on Feb. 18 before the market opens, and analysts estimate earnings of 17 cents a share.
-- Written by Jud Pyle in Chicago
At the time of publication, Pyle did not have a position in the stock mentioned. 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."