MMR

Transocean LTD (RIG) Put Buyer Braces for Single Digits

Transocean LTD (NYSE:RIG) has surged nearly 30% in June amid rising oil prices

Jun 8, 2016 at 3:07 PM
facebook X logo linkedin


Jefferies raised its price target on Transocean LTD (NYSE:RIG) to $10.50 from $9.50 earlier. While this bullish brokerage note and rising oil prices are helping to lift the energy stock -- RIG was last seen up 0.6% at $11.46 -- options traders, it appears, are bracing for the worst.

At last check, put options were trading at two times the expected intraday rate -- and outpacing call options by a nearly 3-to-1 margin. Drilling down, more than 82% of the day's put volume has centered at the out-of-the-money July 10 strike, due mostly to a massive block of 20,000 contracts that crossed earlier.

According to Trade-Alert, this block was bought to open for an initial cash outlay of $680,000 (number of contracts * $0.34 premium paid * 100 shares per contract). This is also the most the speculator stands to lose, should RIG remain in double-digit territory through the close on Friday, July 15 -- when the back-month options expire.

However, Trade-Alert also speculates that this activity could be at the hands of a shareholder protecting recent paper profits against an unexpected decline in the shares. While RIG remains a long-term laggard -- down nearly 39% year-over-year -- the stock has surged 29.5% from its May 24 low of $8.85.

Today's put player may not be the only one using options to hedge against an unwanted RIG move. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 4.39 sits just 3 percentage points from a 52-week peak. With more than one-quarter of Transocean LTD's (NYSE:RIG) float sold short, some of this call buying could be a result of short sellers protecting against any more upside.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical  levels, and top economic stories straight to your inbox.

 

AI has exploded ever since ChatGPT set the world on fire near the end of 2022.

Numerous companies with connections to artificial intelligence have seen their stocks soar.

That includes Nvidia, the poster boy of AI.

Its stock has skyrocketed 716% since ChatGPT’s debut. But here’s the thing …

While everyone’s still counting their money from this first AI boom … Nvidia and countless others have moved on to the next stage.

That includes Big Tech, which is currently making a series of peculiar investments in a few strange companies. This has nothing to do with tech. At least on the surface …

Yet, these strange investments could be the early ripples of a massive wave …Without them, ChatGPT could stop operating … Amazon, Google, Microsoft and more could see profits drop drastically.

In fact, Elon Musk says these investments are critical when it comes to solving the number one problem facing AI.

Now, Silicon Valley legend Michael Robinson has identified two companies that could play a significant role in the solution.

Their stocks just may be the key to AI 2.0.

Find out more about these two companies today.
 (ad)