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Option Brief: Transocean LTD (NYSE:RIG) options activity has gone through the roof today -- especially on the put side, where volume is roughly 15 times the intraday norm. As such, the stock's 30-day at-the-money implied volatility (IV) has jumped by 17.2% to 26.7%.
More than half of RIG's put volume has transpired at the May 37 strike, which has seen more than 29,500 contracts -- including a block of nearly 11,300 -- change hands on open interest of just 228 contracts. Also, IV at the strike is on the rise, and 66% of the volume has traded at the ask price. All told, it appears new bearish bets are being initiated -- a theory that Trade-Alert supports.
By purchasing the out-of-the-money (OOTM) puts, the speculators expect RIG to sink below $37 by the close on Friday, May 16, when the options expire. At last check, the shares were off 3.5% at $39.37, after earlier touching a fresh annual low of $39.14. Regardless of what happens, the most the put buyers have at stake is the initial cash outlay -- which they'll surrender in total if they're holding OOTM options at expiration.
Technically speaking, Transocean LTD (NYSE:RIG) has struggled considerably in 2014, shedding more than 20%. Since late December, in fact, the shares have been pressured lower by their descending 32-day moving average.