Short-Term Puts in High Demand on Transocean Ltd. (RIG)

Transocean LTD's (RIG) weekly 5/1 17-strike put is hot today

Apr 16, 2015 at 3:19 PM
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Transocean LTD (NYSE:RIG) puts are popular today, with the contracts trading at 1.8 times what's typically seen at this point in the day -- and outpacing calls by a more than 2-to-1 margin. Drilling down, nine of RIG's 10 most active options expire in the next four weeks, with the stock's weekly 5/1 17-strike put garnering the majority of the attention.

In fact, nearly 25,000 contracts have changed hands here -- mostly due to a massive block of 10,000 that was bought to open earlier for $400,000 (number of contracts * $0.40 premium paid * 100 shares per contract). This is the most the speculator stands lose, should RIG maintain its footing atop the $17 mark through the close on Friday, May 1 -- when the weekly series expires. Profit, meanwhile, will accrue on a move south of the at-expiration breakeven mark of $16.60 (strike less premium paid).

Today's accelerated put activity is nothing new for RIG, as evidenced by the recent action at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Echoing this is the security's Schaeffer's put/call open interest ratio (SOIR) of 3.31, which ranks in the 93rd annual percentile. In other words, short-term speculators have been more put-heavy on RIG just 7% of the time within the past year.

Technically speaking, the stock has struggled over the past 52 weeks, down 54.3% to trade at $18.54. What's more, the equity's recent rally attempt was quickly contained by its 120-day moving average -- a trendline that has ushered Transocean LTD (NYSE:RIG) lower since last July.

Daily Chart of RIG Since April 2014 With 120-Day Moving Average
 

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