ConocoPhillips (COP): Is Takeover Chatter Baiting Option Bulls?

ConocoPhillips (COP) calls remain popular amid Exxon Mobil Corporation (XOM) rumors

by Andrea Kramer

Published on Mar 23, 2015 at 2:08 PM
Updated on Apr 20, 2015 at 5:32 PM

ConocoPhillips (NYSE:COP) jumped as high as $64.18 earlier, on what some media outlets attribute to unconfirmed M&A chatter with Exxon Mobil Corporation (NYSE:XOM), as well as a possible asset sale for COP. While the stock has since slipped back into the red -- down 0.3% at $63.60 -- some option players are gambling on a rally by Friday's close.

COP call volume spiked around the same time the shares did, and is currently running at a slightly accelerated clip, compared to the stock's average afternoon volume. Most active by a mile is the weekly 3/27 64-strike call, which has seen apparent buy-to-open activity. By purchasing the calls at a volume-weighted average price (VWAP) of $0.65, the buyers will make money if COP topples $64.65 (strike plus VWAP) by the end of the week, when the options expire.

Even before today's rumor mill got to work, COP speculators were scooping up calls at a rapid-fire rate. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 14.39 stands higher than 98% of all other readings from the past year.

Echoing that, COP's Schaeffer's put/call open interest ratio (SOIR) has plummeted to 0.71 -- in just the 8th percentile of its annual range. In simpler terms, short-term traders have rarely been more call-biased on COP.

Technically speaking, ConocoPhillips (NYSE:COP) has largely gone the way of crude oil in recent months. Since notching a record peak of $87.09 in late July, the shares have surrendered nearly 27%, falling to a fresh annual low of $60.57 just over a week ago.


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