RIG's aggressive move higher is catching bearish traders off guard
Transocean LTD (NYSE:RIG) stock is ripping higher, as oil prices spike in reaction to weekend drone attacks on Saudi Arabian crude production facilities. RIG shares are up 13.4% to trade at $6.50, gapping above their 100-day moving average -- currently perched at $6.00 -- for the first time since late April.
This aggressive move higher has sparked a rush of activity in RIG's options pits, with roughly 59,000 calls on the tape -- five times what's typically seen at this point in the day. The October 6 call has seen the most action so far, and the International Securities Exchange (ISE) confirms buy-to-close activity at this now in-the-money strike.
Data indicates that almost 12,750 of these calls were sold to open one week ago, when RIG was trading near $5.80, struggling to break out above its 80-day moving average. The oil stock has been a long-term laggard, down 44.7% year-over-year. Plus, today's pop has Transocean encountering another potential level of resistance at $6.50, which kept a tight lid on the shares in early July.
Speculative players have been positioning for even more downside for the energy shares. At the ISE, Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), RIG's 10-day put/call volume ratio of 0.36 registers in the 78th annual percentile. So, while calls have outpaced puts on an absolute basis, the rate of put buying relative to call buying has been quicker than usual.
Elsewhere, short interest on RIG jumped 12.8% in the most recent reporting period to 69.69 million shares. This represents 17.8% of the stock's available float, or 3.5 times the average daily pace of trading. It's possible some of this skepticism is contributing to today's upside, as the weaker bearish hands hit the exits as the stock jumps.
