Options Bulls Brush Off Occidental Petroleum's Latest Slide

KeyBanc downgraded OXY stock earlier

by Karee Venema

Published on Apr 24, 2019 at 10:30 AM
Updated on Apr 24, 2019 at 10:37 AM

The shares of Occidental Petroleum Corporation (NYSE:OXY) are down 3.4% at $60.21, after the Houston, Texas-based oil and gas firm put in a $57 billion cash-and-stock bid for Anadarko Petroleum (APC) -- topping rival Chevron's (CVX) offer made earlier this month. OXY's proposal equates to $76 per APC share, an 18.7% premium to last night's close at $63.99.

The news wasn't well-received at KeyBanc, with the brokerage firm downgrading its OXY rating to "sector weight" from "overweight." Elsewhere, Raymond James analyst Muhammed Ghulam said, "This is not a smart move on the part of Occidental." The majority of the 20 analysts covering OXY still maintain a "strong buy" rating, though, while the average 12-month price target sits well above current trading levels at $78.21.

Options traders are bullish on the energy stock, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), OXY's 10-day call/put volume ratio of 7.05 ranks in the 98th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

This call-skewed trend is continuing today, with 32,250 calls and 20,000 puts traded so far -- 21 times what's typically seen at this point, and put volume already at a new annual high. The May 62.50 call is most active, and Trade-Alert suggests some of these front-month options are likely being bought to open.

Looking closer at the charts, OXY shares have been stuck trading below the $67-$68 region since an early December bear gap. The oil stock has shed 12.5% since an April 8 rejection from this familiar ceiling, and is headed toward its third straight weekly loss.


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