Schaeffer's Trading Floor Blog

Halcon Resources Corp (HK) Attracts Call Buyers Amid Swoon

HK call buyers may be shorts trying to protect against an unforeseen rally

by 2/4/2014 2:58 PM
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Call buyers have been targeting Halcon Resources Corp (NYSE:HK) over the past few sessions. At the International Securities Exchange (ISE), 9,860 calls were purchased to open during the last week, compared to just seven puts.

Meanwhile, the energy name's 10-day ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio is docked at a brow-raising 89.81 -- meaning nearly 90 calls have been bought to open for every put over the previous two weeks. Statistically speaking, this reading is just 2 percentage points shy of a 12-month acme, conveying speculators have bought to open HK calls (relative to puts) at a near-extreme rate.

These bets may not necessarily be bullish, however. Actually, with 12.5% of Halcon Resources' float sold short, it's possible that a portion of the calls were initiated by shorts looking to hedge their bearish stock positions.

Among short-term traders, in fact, puts have actually been the options of choice, relatively speaking. Schaeffer's put/call open interest ratio (SOIR) for HK is lodged at 1.02 -- or higher than 71% of similar readings taken in the last year.

Over on the Street, the brokerage bunch is pessimistic toward the Houston-based energy firm. Specifically, just under half of the 13 analysts covering the shares rate them a tepid "hold" or worse -- though by no means are these evaluations static. In fact, just this morning, Global Hunter Securities raised its rating on HK to "neutral" from "sell."

From a technical perspective, things don't look good for Halcon Resources Corp (NYSE:HK), despite today's nearly 2% rise to $3.47 per share. On a year-over-year basis, the stock has shed over half of its value, and on a relative-strength basis, it has underperformed the S&P 500 Index (SPX) by 26.5 percentage points in the past 60 trading days. Also of concern: HK is facing overhead pressure from its descending 10-week moving average.

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