Traders Bet Against a Civeo Corporation (CVEO) Recovery

Civeo Corp (CVEO) call sellers are gambling on a long-term technical ceiling

Digital Content Group
Dec 31, 2014 at 12:47 PM
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Civeo Corp (NYSE:CVEO) is trying to come back from yesterday's analyst-exacerbated drubbing, when the shares lost more than half of their value. At last check, the stock was up 3.8% at $4.07 (but remains on the short-sale restricted list). Option traders are responding by targeting calls, with the contracts crossing at 23 times the intraday norm.

Digging deeper, CVEO's most active option is the January 2016 7.50-strike call, where nearly 9,000 contracts are on the tape. However, this isn't the work of option bulls; in fact, the option is seeing some sell-to-open activity, as traders wager on a long-term technical ceiling for the shares. Specifically, the call writers believe the stock will churn below $7.50 through January 2016 options expiration -- despite the fact it was above that level earlier this week.

While the aforementioned traders targeted a long-term strike, now appears to be an opportune time to sell premium on short-term contracts. CVEO's Schaeffer's Volatility Index (SVI) of 115% registers at the top of its annual range, suggesting the stock's front-month options are relatively expensive, from a volatility perspective.

More traditional option skeptics have also swarmed Civeo Corp (NYSE:CVEO) in recent months. During the last 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open more than two CVEO puts for every call.

Daily Chart of CVEO since May 2014

 

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