Options Bulls Flock to Surging Commodity Stocks

Commodity stocks Halliburton Company (NYSE:HAL), Seadrill Ltd (NYSE:SDRL), and Arch Coal Inc (NYSE:ACI) are seeing increased call volume today

by Josh Selway

Published on Aug 27, 2015 at 3:08 PM
Updated on Jun 24, 2020 at 10:16 AM

As the equities market celebrates its swelling gains, commodities are not being left behind. Most notably, crude oil has bounced from more than six-year lows, adding over 10% -- its biggest one-day percentage pop since March 2009. In light of these gains, options bulls have been rushing toward several commodity stocks, including Halliburton Company (NYSE:HAL)Seadrill Ltd (NYSE:SDRL), and Arch Coal Inc (NYSE:ACI).

HAL is benefiting from crude's surge by picking up 8% to trade at $37.17. This price action puts the shares within a chip-shot of their year-to-date breakeven point of $39.33. As a result, call volume is running at three times the level normally seen at this point in the day. Traders are buying to open the October 40 call -- the stock's most popular contract -- betting on extended gains for the shares. 

It's not unusual to see Halliburton Company speculators take an interest in calls over puts. According to the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.47, traders targeting options that expire in three months or less have only been more call-skewed 1% of the time in the past 12 months. 

Sector peer SDRL is taking off, too, last seen 10.2% higher at $7.16. The stock is quite the long-term laggard, though -- it was trading near $36.90 this time last year. It's not just oil's jump that's fueling the stock: the company wooed investors with a half-billion-dollar cost-reduction plan during its earnings release last night. 

As such, calls are crossing at three times the average intraday pace, and it seems traders are looking for extended gains through tomorrow's close by buying to open the weekly 8/28 7.50-strike call. This is a change of pace for what's normally seen from Seadrill Ltd option traders. SDRL's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 1.54 -- higher than 70% of other readings from the past year. 

Oil stocks aren't the only commodity names enjoying gains today. Coal stocks are booming, with ACI sporting a 21.6% lead at $6.19. In response, call players are inundating the equity's options pits, with the contracts changing hands at 13 times the average volume. One of the most popular contracts is the October 6 call, and it looks like traders are buying it to open

Considering Arch Coal Inc was down more than 71% year-to-date coming into today, it's not surprising that today's call-buying craze is extremely rare. In fact, ACI's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.96 sits higher than 73% of all comparable readings taken during the last 12 months. 

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