Option Bulls Expect Halliburton Company (HAL) to Weather the Storm

Halliburton Company is down roughly 10% on poorly received M&A news

Nov 17, 2014 at 2:31 PM
facebook twitter linkedin


Halliburton Company (NYSE:HAL) has plunged 10.3% today to $49.41, as Wall Street turns its nose up at the company's acquisition of Baker Hughes Incorporated (NYSE:BHI). Sharing in this sentiment is Cowen, which downgraded HAL to "market perform" from "outperform," and slashed its price target to $57 from $70, citing the stock's "limited appeal" during the takeover process. Against this backdrop, the equity has been placed on the short-sale restricted list, and options volume is running at five times what's typically seen at this point in the day.

Despite today's bearish gap, speculators are showing a rare preference for calls over puts. By the numbers, roughly 87,000 calls have changed hands, compared to around 52,000 puts. Short-term contracts are in demand, too, as evidenced by HAL's 30-day at-the-money implied volatility (IV), which is up 0.6% to 38.9% -- in the 97th percentile of its annual range.

Drilling down, Halliburton Company's (NYSE:HAL) November 51 call has seen the most action, with 11,210 contracts on the tape at last check. The majority of these calls have traded at the ask price, IV is higher, and volume outstrips open interest -- signifying buy-to-open activity. Amid today's sell off, delta on the call has dropped to 0.30 from 0.89 at the end of last week, suggesting a less than 1-in-3 chance the option will be in the money at this Friday's close, when front-month options expire.

 

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 

 

300x250 - Banner 3 - v1