Traders See More Losses Ahead for Whiting Petroleum Stock

WLL's sell-off has been remarkable

Oct 4, 2019 at 10:05 AM
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Whiting Petroleum Corp (NYSE:WLL) has been obliterated on the charts in the past year, suffering a steady downtrend, and more recently falling from $18 to yesterday's close of $7.31 in under two months. The energy concern is under pressure again today, down another 2.5% at $7.10, after Credit Suisse downgraded WLL to "underperform" from "neutral," and lowered its price target to $5 from $11. The brokerage firm said the company's "towering debt" will continue to be a concern unless there's a sharp rebound in oil prices.

Looking at options data, it would seem a number of speculators expect more downside for WLL shares, too. Peak open interest on the security sits at the March 3 put, so anyone who's bought to open the contract sees the stock moving below $3 by next March. As for near-term traders, the 10-strike put is the top contract in the front-month October series.

Prospective options traders may not want to take a short-term approach, though, considering the heightened volatility expectations being priced into WLL's options right now. For example, the stock's Schaeffer's Volatility Index (SVI) of 103% ranks in the 92nd annual percentile, showing premiums are higher than normal on near-term contracts.

Those betting against the stock should note that losses could be sparked by even more bearish analyst attention. Despite the fact that Whiting Petroleum has lost more than two-thirds of its value in 2019, there remain eight "strong buy" recommendations on the shares, leaving plenty of room for more downgrades to come through.


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