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Talisman Energy Inc. (USA) (NYSE:TLM) calls are trading at seven times the average intraday rate this afternoon, and are outpacing puts by a roughly 7-to-1 margin. More than half of the day's call volume has centered on two strikes -- the January 2015 13 strike and the September 12 strike -- but these long- and short-term traders are setting up their positions in decidedly different ways.
TLM's January 2015 13-strike call has seen the most action, with 13,656 contracts on the tape. A healthy portion of these have changed hands at the bid price, signaling seller-driven activity. Plus, volume outstrips open interest, making it safe to assume new short positions are being initiated. By writing the calls to open, speculators expect TLM to remain south of the $13 mark -- a level not toppled since last October -- through January 2015 options expiration.
Meanwhile, the majority of the September 12 calls have crossed at the ask price, suggesting they were purchased. Data from the International Securities Exchange (ISE) confirms that, indeed, a number of positions have been bought to open here. This activity echoes Monday's trading, when 12,505 contracts traded here -- mostly at the ask -- and open interest surged overnight, confirming buy-to-open activity. At last check, delta on the front-month strike was docked at 0.25, suggesting a 1-in-4 chance of an in-the-money finish at the close on Friday, Sept. 19 -- when the options expire.
Should TLM fail to topple the $12 mark, the most the call buyers will lose is the initial premium paid. However, the stock's 30-day at-the-money implied tagged an annual high earlier, and its Schaeffer's Volatility Index (SVI) of 54% is sitting above 98% of similar readings taken in the past year, indicating premium on these front-month contracts is relatively expensive at the moment.
On the charts, Talisman Energy Inc. (USA) (NYSE:TLM) showed some signs of life in late July, when it gapped higher on acquisition rumors. This rally was quickly halted by the stock's 320-day moving average, and since its July 23 close at $11.17, TLM has shed 3.8% to trade at $10.75.