Transocean LTD (RIG) Option Bears Come Out Swinging

Transocean LTD (RIG) put volume is running at four times the average intraday pace

Jun 20, 2016 at 3:06 PM
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Transocean LTD (NYSE:RIG) has been seen both sides of breakeven today; although, the energy stock was last seen up 0.3% at $11.34, amid rising oil prices. In the options pits, meanwhile, the bearish buzz is building toward RIG stock, with puts changing hands at four times the average intraday rate -- and outpacing calls by a nearly 4-to-1 margin.

The most active strike by a mile is RIG's July 10 put, where roughly 28,300 contracts have changed hands. The lion's share of this activity is a result of one speculator buying to open a 22,000-contract block for $594,000 (number of contracts * $0.27 premium paid * 100 shares per contract). While profit for the put buyer will accumulate on a move south of breakeven at $9.73 (strike less premium paid), losses are capped at the initial cash outlay, should RIG settle north of $10 at the close on Friday, July 15 -- when the front-month options expire.

While today's activity echoes a big bearish bet made on the stock just weeks ago, the broader tilt RIG's options pits has been toward the long calls. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, RIG's 10-day call/put volume ratio of 2.29 ranks in the 88th percentile of its annual range.

Elsewhere, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.46 rests lower than 65% of all comparable readings taken in the past year. In other words, short-term speculators are more call-heavy than usual toward RIG.

With more than 25% of Transocean LTD's (NYSE:RIG) float sold short, though, a portion of this recent call buying could be a result of shorts hedging their bearish bets. In fact, while the stock remains a long-term laggard -- down 33% year-over-year -- it has rallied in step with oil recently, up almost 16% month-to-date.

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