Call Traders Chime in on CXO Amid Company Buyout

The oil sector is consolidating due to coronavirus struggles

Deputy Editor
Oct 19, 2020 at 12:56 PM
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The shares of Concho Resources Inc (NYSE:CXO) are up 0.9% at $49.03 at last check, after news that ConocoPhillips (COP) will be buying the company for $9.7 billion. The consolidation of these two U.S. shale giants comes amid a widespread oil sector struggle, due to coronavirus. . 

On the charts, CXO is struggling to break out past pressure at the $50 region. While the equity spent most of late-September and early August consolidating below the 40-day moving average, it looks as if this trendline turned into support during last week's bull gap. Year-to-date, however, CXO is still down 43.8%. 

CXO

The brokerage bunch is unanimously confident, with all but one of the 21 analysts in coverage sporting a "buy" or better coming into today. Meanwhile, the 12-month consensus price target of $70.65 is a 44% premium to current levels. 

Today's news has options bulls rushing to Concho Resources stock. So far today, 5,697 calls have crossed the tape -- eight times what's typically seen at this point, with volume pacing for the 99th percentile of its annual range. Most popular is the weekly 10/30 50-strike call, where new positions are being opened. 

Echoing today's trading, in the past 10 days, 8.14 calls were picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stand in the 94th percentile of its annual range, meaning calls have been picked up at a much faster-than-usual rate in comparison to the last year. 

Lastly, CXO sports a Schaeffer's Volatility Index (SVI) of 57%, which stands higher than just 17% of all other readings in the past 12 months. This implies that options players are pricing in relatively low volatility expectations at the moment, making now a good time to weigh in on CXO's next move with options. 

 

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