Whiting Petroleum Corp (WLL) Option Bears Aren't Buying the Bounce

Whiting Petroleum Corp (WLL) is enjoying a rare day in the sun, but put buyers don't think it will last

by Alex Eppstein

Published on Jan 22, 2016 at 11:46 AM
Updated on Jan 22, 2016 at 1:18 PM

Energy stock Whiting Petroleum Corp (NYSE:WLL) is one of the biggest winners today, up 15.7% at $6.80 amid crude oil's comeback. The effects are being felt in WLL's options pits, with intraday volume at nearly three times the norm. By the numbers, 16,000 contracts are on the tape, versus an expected amount of roughly 5,400.

Diving right in, WLL's weekly 1/29 7-strike put is seeing considerable activity. Nearly 1,400 contracts are on the tape, and data suggests the majority are being bought to open for a volume-weighted average price (VWAP) of $0.55. Buyers of the in-the-money puts are expecting the shares to give up today's gains and end south of $7 by next Friday's close, when the weekly series expires.

Short-term puts have certainly been attractive to traders lately. WLL's Schaeffer's put/call open interest ratio (SOIR) of 0.92 ranks in the 98th percentile of its annual range. In other words, speculators targeting options with a shelf-life of three months or less have been more focused than usual on puts.

They're far from the only skeptics. During the latest reporting period, short interest on WLL shot 21.8% higher, and now makes up 15.7% of its float. However, it would take only two sessions to cover these positions, at the stock's average daily volume.

Elsewhere, analysts are quite bullish toward the shares. In fact, 78% of brokerages with coverage on WLL consider it a "buy" or better, while its consensus 12-month price target of $19.76 nearly triples current levels.

That anyone's holding out hope for Whiting Petroleum Corp (NYSE:WLL) is a bit surprising. The stock has been a disaster on the charts, losing over three-quarters of its value during the past 12 months. While today's charge higher is impressive, the shares are approaching potential resistance near their 20-day moving average, which hasn't been cleared on a closing basis since early November.

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