The largest blocks were in next month's contracts, with the October 30 calls trading for $1.10 to $1.30. More than 6,400 changed hands, well above the previous open interest of 292, so this is new positioning. OptionMonster's scanners show that the calls started trading near noon and swelled into the close.
Long calls lock in the price where investors can buy a stock, letting them cheaply position for a move higher and leverage a rebound with limited cost. None of us ever wants to "catch a falling knife," so Monday's traders were using the options to manage that risk.
SeaDrill ended the session down 2.43% to $30.12, its lowest close since October 2011. The main factors for its slide are declining day rates, elevated competition, and a weak market. The company is positioned well with a strong portfolio of assets, but it also will need the broader energy sector find its footing.
More than 35,000 contracts traded overall in the name, more than triple its daily average for the last month.
Najarian has no positions in SDRL.