Schaeffer's Trading Floor Blog

Put Buying Accelerates on LyondellBasell Industries NV (LYB)

LYB traders may be speculating on a drop or protecting against one

by 2/12/2014 12:48 PM
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Netherlands-based chemical company LyondellBasell Industries NV (NYSE:LYB) has experienced a recent surge in put buying. At the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), for instance, the stock has racked up a five-day put/call volume ratio of 5.11, with puts bought to open outpacing calls by a more than five-fold margin.

Taking a step back to include two weeks' worth of data and numbers from the NASDAQ OMX PHLX (PHLX), we discover a similar skew toward puts over calls. Specifically, the equity's 10-day ISE/CBOE/PHLX put/call volume ratio is 2.23 -- higher than 68% of similar readings from the past year. In other words, speculators have scooped up puts over calls with more rapidity just 32% of the time in the previous 12 months.

Meanwhile, Schaeffer's put/call open interest ratio (SOIR) for LYB sits at 1.02, meaning put and call open interest are roughly equal among options with a shelf-life of three months or less. However, the SOIR ranks in the 73rd percentile of its annual range, signaling a stronger-than-usual bias toward short-term puts over calls.

Currently, peak put open interest among short-term options resides at the out-of-the-money April 75 strike. Nearly 10,500 contracts are located there, and most were bought to open, as option bears expect LyondellBasell will slide from its current perch at $82.60 during the next two-plus months. Alternatively, these individuals may be shareholders buying puts to limit potential downside risk, should the stock unexpectedly take a dive.

Technically speaking, LyondellBasell Industries NV (NYSE:LYB) has performed solidly over the long term, adding over 36% during the last 52 weeks. Recently, the shares took a bounce off of their ascending 32-week moving average, which has acted as a level of support since February 2012.

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