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Option Brief: It's a busy day in Transocean LTD's (NYSE:RIG) options pits, particularly on the call side. So far, nearly 7,900 calls have changed hands, almost tripling the average intraday amount. The bulk of this action has transpired at the November 50 call.
The majority of the contracts traded at the out-of-the-money strike did so near the ask price, including a 4,479-lot -- RIG's largest single-block transaction of the morning. At the same time, implied volatility has gained 3.1 percentage points at the strike, suggesting the contracts were bought to open. Therefore, these speculators are eyeing an advance from the current per-share price of $47.23 past $50 by the closing bell on Friday, Nov. 15, when the options expire. Whether or not that happens, the most the traders have on the line is the initial premium paid.
Of course, given that RIG's short interest levels increased sizably during the last two reporting periods -- specifically, by 33.3% -- it's possible the aforementioned individuals are actually long-term bears seeking short-term protection against a potential rally. This makes sense ahead of the energy company's upcoming appearance in the earnings confessional, which takes place after the market closes on Wednesday, Nov. 6. What's more, the equity is prone to big price moves, and jumped 5.6% on Oct. 22 after it was announced RIG would become the newest member of the S&P 500 Index (SPX).
Indeed, Transocean LTD (NYSE:RIG) has topped analysts' bottom-line, per-share estimates in six out of the past eight quarters. This time around, the Street is expecting a profit of $1.06 per share.