Option Bulls Take a Chance on Marathon Oil Corporation (MRO)

Marathon Oil Corporation (NYSE:MRO) is on pace for its best close of the year, after the oil company agreed to sell $950 in non-core assets

Apr 12, 2016 at 12:13 PM
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Energy stock Marathon Oil Corporation (NYSE:MRO) has rocketed 11.3% higher today to $12.99, putting the shares on pace for their highest close of the year. The company last night announced it has agreed to sell $950 million in non-core assets, in its latest attempt to raise cash. What's more, fresh speculation of a production freeze between two major oil producers is lifting energy stocks across the board. As such, MRO's stock volume is soaring, and option bulls are also getting in on the action. 

MRO call options are trading at almost four times the average intraday rate, outpacing puts by a nearly 5-to-1 margin. The two most popular options by far are the April and May 13 calls. Based on the data, it's possible traders are initiating long positions here, betting on MRO to keep rising through Friday's close and the close on Friday, May 20, respectively. 

Looking back, MRO options traders have been more skeptical of late. The stock's 10-day put/call volume ratio of 1.10 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks right near the top quartile of all readings from the past year. In other words, put buying has been occurring at a quicker-than-usual clip during the past two weeks. 

While bearish bets have been popular in the options pits, it's a whole other story among short sellers. Specifically, short interest on MRO fell 40.5% during the past two reporting periods. It would now take short sellers less than two days to cover their positions, at the oil stock's normal daily trading volumes. 

On the charts, Marathon Oil Corporation (NYSE:MRO) remains well below its price near $30 from a year ago, but the stock has been fighting back recently. MRO has blown past the broader S&P 500 Index (SPX) by 42 percentage points in the past two months, and is set to close above its 100-day moving average -- a long-time level of resistance -- for a third straight session. Prior to this, MRO hadn't conquered the trendline on a closing basis since May. 

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