Analyst: Marathon Petroleum Is 'In a Class of its Own'

MPC calls are popular today after the bull note

by Patrick Martin

Published on Oct 3, 2018 at 2:33 PM
Updated on Oct 3, 2018 at 2:34 PM

As oil prices surge, so too have some stocks in the energy sector. The shares of Marathon Petroleum Corp (NYSE:MPC) are up 3.5% to trade at $86.13 today, after Barclays reinstated its coverage on the oil stock with an "overweight" rating and $125 price target, representing 50% upside from yesterday's close. The analyst named MPC its new top pick among refiners, and put its refining capacities in "a class of its own."

Marathon Petroleum stock is on track for its best day since July 26, and is just a chip-shot off its Sept. 25 record high of $88.45. The oil stock boasts a 30.7% lead in 2018, and recent pullbacks have been contained by its 50-day moving average.

Daily Stock Chart MPC

A short squeeze could keep the security pressing toward fresh record highs. Short interest increased by 10% in the last two reporting periods to a record high 33.61 million shares. This represents a healthy 7.5% of MPC's total available float, and 7.3 times the average daily trading volume. 

Options traders today are diving right into calls. Nearly 19,000 calls have been traded -- two times what's typically seen at this point in the day, with volume in the 99th annual percentile. Much of the action has centered on the January 2019 90-strike call, where nearly 8,000 contracts have traded. However, most of the calls have traded at the bid price, suggesting the calls may have been sold to open.

The good news for options buyers is that the security sports a Schaeffer's Volatility Scorecard (SVS) of 90 out of 100, which shows the stock has tended to make larger-than-expected moves on the charts compared to what the options market had priced in. In simpler terms, now may be an opportune time to speculate with Marathon Petroleum options.

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