Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Marathon Oil Traders Bank on Short-Term Support

Put selling ramps up within MRO's front-month series of options

by 10/4/2012 2:08 PM
Stocks quoted in this article:

Bullish options activity has been running hot on Marathon Oil Corporation (NYSE:MRO - 29.78) lately, as reflected by data pulled from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, the equity's 50-day call/put volume ratio checks in at 6.02, confirming that traders have bought to open more than six calls for every put during the past few months. This ratio arrives in the 78th annual percentile, indicating that speculators have been scooping up calls over puts at an accelerated clip.

However, puts are all the rage in today's session, as roughly 34,000 of these options have been exchanged so far. This is 15 times the security's expected intraday volume, and more than 14 times the number of calls traded. Garnering notable attention is the out-of-the-money October 27 strike, which has seen close to 6,900 puts cross the tape -- all of them at the bid price, pointing to seller-fueled activity. These contracts changed hands at a volume-weighted average price (VWAP) of $0.06 apiece. Since this strike currently carries open interest of fewer than 1,900 contracts, it's safe to assume that new positions are being initiated here today. By selling these puts to open, traders are betting that the stock will maintain its perch atop $27 through Oct. 19, which is when front-month options expire. This would render the puts worthless, and allow the speculators to pocket the initial credit received.

Meanwhile, short interest on the oil & gas issue spiked by about 17% during the most recent reporting period, implying that some of the previously noted call buying could be the result of short sellers looking to hedge their pessimistic positions. However, MRO's bearish camp is far from crowded, as these shorted shares make up less than 2% of the security's float.

More than half of the analysts covering the equity maintain high expectations for MRO. The stock currently sports seven "strong buys" and two "buy" recommendations, versus seven "holds" and not a single "sell" suggestion to be found. This optimistic sentiment slant isn't unfounded, as the equity has climbed about 30% during the past year, and has outperformed the broader S&P 500 Index (SPX) by more than 10 percentage points over the last 60 sessions. On the charts, MRO appears poised to close a fourth consecutive week atop its 40-week moving average, which had previously acted as a ceiling since early May. Should the shares keep up their current momentum, today's traders could end up pocketing the premiums from their put sales within the next couple of weeks.

Here are some additional articles of interest:


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.