Oil Pop Lures Option Bulls to Goodrich Petroleum, Linn Energy, LLC

Goodrich Petroleum Corporation (GDP) and Linn Energy LLC (LINE) are among the commodity stocks seeing notable option activity

Feb 9, 2015 at 2:39 PM
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Energy names are following black gold higher today, and option bulls are betting on more upside for Goodrich Petroleum Corporation (NYSE:GDP) and Linn Energy LLC (NASDAQ:LINE), among others. Options are flying off the shelves at a rapid-fire rate on both equities, with one GDP trader apparently cutting losses and LINE speculators circling the July series.

GDP has added 12.4% to linger near $3.44, and intraday call volume is running at six times the typical pace. Almost all of the action appears to be buy-to-close activity at the June 2.50 call, according to Trade-Alert, as a block of 40,000 contracts traded at 1:35 p.m. ET. Meanwhile, it looks like short-term bulls are buying to open the February 3.50 call, amid hopes for GDP to muscle atop the strike by the close on Friday, Feb. 20, when front-month options expire. GDP shares peaked at $3.48 today.

Elsewhere, the aforementioned option trader may not be the only bear abandoning ship. Short interest accounts for more than half of Goodrich Petroleum Corporation's (NYSE:GDP) total available float, representing nearly six sessions' worth of pent-up buying demand, at the equity's average pace of trading.

LINE has jumped 9% to $14.57, and overall option volume is running at three times the typical intraday pace. Calls and puts are neck-and-neck, with 14,000 contracts traded on each side, and buy-to-open activity detected at the July 14 and 16 calls, as well as the July 16 and 17 puts. Shorter-term traders are seemingly buying to open the February 15 call, which will move into the money if LINE topples the strike by expiration next Friday. Delta on the front-month call has nearly tripled since Friday's close at 0.15, and now sits at 0.42, reflecting the growing odds of an in-the-money finish.

Linn Energy LLC (NASDAQ:LINE) has added more than 43% so far in 2015, yet short-term traders are more put-heavy than usual. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.72 stands higher than 86% of all other readings from the past year.


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