Puts Pop as Transocean LTD (RIG) Bucks Bullish Oil Action

Transocean LTD (NYSE:RIG) is sinking, after the company received an early termination notice

Oct 3, 2016 at 3:06 PM
facebook X logo linkedin

Even with oil prices surging -- November-dated crude futures were last seen up 1.4% at $48.90 per barrel -- energy stock Transocean LTD (NYSE:RIG) is down 7.4% at $9.87, staring down stiff historical headwinds. Diving deeper, an early termination notice from Reliance Industries for the Discoverer India has sent RIG stock back into single-digit territory -- and has sparked a rare surge in put volume in Transocean's options pits.

At last check, roughly 15,000 RIG puts had changed hands -- 1.5 times the average intraday pace -- compared to about 13,000 calls. Most active is the stock's October 10.50 put, where it looks like the options are being sold. However, it's not clear at the moment whether speculators are opening or closing positions.

From a wider sentiment perspective, though, options traders have shown a clear preference for long calls over puts in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), RIG's 10-day call/put volume ratio of 1.98 ranks in the 71st annual percentile. In other words, calls have been bought to open over puts at a faster-than-usual clip.

More specifically, RIG's October 11.50 call has seen the biggest rise in open interest over this time frame, with more than 10,800 contracts added. According to the major options exchanges, a healthy portion of this activity has been of the buy-to-open kind, meaning traders are eyeing a breakout above $11.50 by the time the options expire at the close on Friday, Oct. 21.

With more than 28% of the stock's float sold short, though, some of this recent call buying -- particularly at out-of-the-money strikes -- is likely a result of short sellers hedging against any unexpected upside. And while Transocean LTD (NYSE:RIG) has lately rebounded off its most recent lows near $8.80, the stock remains a long-term laggard, down 33% year-over-year.

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.

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI