Eye catching prints of out-of-the-money puts in January. Companies exposed to crashing oil prices. Is this a theme?
Today, nearly 12,000 of the Jan 35 puts have traded in Valero Energy (VLO), versus just 129 before today. We’ve seen similar purchases of even farther out of the money puts in Occidental Petroleum (OXY) (50,000+ 2021 2.50 puts) and others.
The Set Up
- Valero is trading ~$50
- Those puts (trading ~$4) break even at $31
- Recent low in VLO was ~$32
- Those puts breakeven only if VLO makes a new low.
- The stock is up 12% today
- Is it outright or a hedge?
6 month expected move chart from OptionsAI:
Valero reports April 30th before the open
2 week expected move from OptionsAI:
The options market is pricing ~11% move over the next two weeks (that capture earnings) or about $5.50 in either direction. The stock was nearly $5 lower earlier today. Perhaps the expected move simply reflects an update to guidance so close to the earnings event, making the event itself less of a catalyst. But when you see one day moves about as big as what’s expected over the next two weeks, it presents possibilities.