Valero Energy Corporation (VLO) Traders Eye the $50 Level

Speculators anticipate a near-term move below $50 for Valero Energy Corporation

by

Published on Dec 4, 2014 at 10:34 AM
Updated on Apr 20, 2015 at 5:09 PM

Valero Energy Corporation (NYSE:VLO) bounced off its 40-day moving average at the end of November, and has rallied 5.6% month-to-date to trade at $51.33. Nevertheless, in yesterday's options pits, traders rolled the dice on a potential move below the half-century mark.

Taking a quick step back, VLO puts were exchanged at quadruple the typical daily rate on Wednesday. Accounting for nearly three-quarters of this put volume was activity at the December 50 strike, where 21,320 contracts -- including several large blocks -- crossed the tape at the ask price, suggesting buyers were at work. What's more, nearly all of the volume translated into open interest overnight, suggesting fresh bearish bets were initiated.

Long story short, these traders anticipate Valero Energy Corporation (NYSE:VLO) will tumble below $50 by the close on Friday, Dec. 19, when front-month options expire. Delta on the contract is negative 0.35, suggesting a 35% chance the option will be in the money at expiration.


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