Weekly Option Bears Fade Halliburton Company (HAL) Rally

Halliburton Company is up nearly 2% on news of a potential merger with Baker Hughes Incorporated

by Karee Venema

Published on Nov 14, 2014 at 10:35 AM
Updated on Apr 20, 2015 at 5:32 PM

Halliburton Company (NYSE:HAL) has popped 1.8% this morning to trade at $54.78 on reports of a potential merger with Baker Hughes Incorporated (NYSE:BHI). This positive price action has speculators rushing the equity's options pits; however, not everyone is convinced the stock will sustain this momentum through tonight's close.

Taking a quick step back, overall options volume is running at three times the intraday average. Short-term contracts are in high demand, too, per HAL's 30-day at-the-money implied volatility, which is 3.4% higher at 36.7% -- in the 96th percentile of its annual range.

Receiving notable attention is the equity's weekly 11/14 55-strike put, where 1,359 contracts have changed hands -- mostly on the ask side, signaling buyer-driven activity. With fewer than 400 contracts currently in residence, it seems safe to assume new positions are being initiated. Traders' profit will accrue on a move south of breakeven at $54.53 (strike less the volume-weighted average price of $0.47), while losses are limited to the initial premium paid, should HAL settle north of $55 at tonight's close, when the weekly series expires.

Widening the sentiment scope reveals option traders have been initiating long puts over calls on HAL at a faster-than-usual clip in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Halliburton Company's (NYSE:HAL) 50-day put/call volume ratio of 0.72 ranks in the bearishly skewed 83rd percentile of its annual range.


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