Q2 STOCKS TO BUY

The $1.1 Million Bearish Bet On Marathon Petroleum Corp (MPC)

Marathon Petroleum Corp (NYSE:MPC) has been rallying with crude futures recently, but put buying has been picking up speed

Dec 21, 2016 at 10:09 AM
facebook X logo linkedin


Options traders have been growing increasingly skeptical of Marathon Petroleum Corp (NYSE:MPC) of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MPC's 10-day put/call volume ratio has jumped to 2.61 from 0.21 over the past two weeks. What's more, the current ratio ranks just 7 percentage points from a 52-week peak, meaning puts have been bought to open over calls at a near-annual-high clip on the energy stock.

This heavy put trading was in full view in Tuesday's session, where 53,919 puts crossed the tape -- 14 times the average daily volume of 3,691, and an annual high for the number of MPC puts traded in a single session. As a point of comparison, fewer than 5,400 calls changed hands, slightly higher than the expected daily amount of 4,979 calls.

Nearly all of the day's put volume centered at the April 35 strike, due to a massive block of 22,853 that Trade-Alert suggests was bought to open for an initial cash outlay of $1.1 million (number of contracts * $0.50 premium paid * 100 shares per contract). What's more, a separate block of 14,481 April 35 puts also appears to have been bought to open for $0.50 apiece, resulting in a net debit of $724,050. While it's not clear if these two transactions are related, the expectation is the same -- for MPC stock to breach $35 by April options expiration. Risk is limited to the initial price paid, while profit will accumulate on a move below breakeven at $34.50 (strike less $0.50 premium).

Given the energy stock's strong technical backdrop, it's possible some of the recent put buying -- particularly at out-of-the-money strikes -- is a result of shareholders protecting paper profits against a pullback. In fact, the shares of Marathon Petroleum Corp (NYSE:MPC) haven't traded south of $35 since late June, and are up 47.6% since bottoming at a post-Brexit low of $32.84 on June 27 -- more recently, rising in step with crude futures. Plus, although the energy stock is down 1.9% today to trade at $48.46, it appears to have found a foothold in the $48.50 area, home to a 61.8% Fibonacci retracement of its July 2015 highs and February 2016 lows.

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.
 
 

“Buy This Stock Now!” - Expert Who Called 11x On TSLA

He called a rare 11x on Tesla…

But now, thanks to Elon & Trump’s new alliance…

He says there’s a new opportunity that could be 1,000x BIGGER than Tesla – and it could completely revolutionize a $23 Trillion market.

It’s trading for less than $5 per share right now…

But it won’t be under the radar for long.

Discover The 1,000x Bigger Elon Opportunity Here

GRAND SLAM COUNTDOWN

 
 

Featured Articles from Trusted Partners:

👀Learn How Dividends Create Passive Income for Life
Receive $200 Off Motley Fool Epic. The Motley Fool Epic $299 discounted offer is based on $499/year list price. Introductory promotion for new members only. Take control of your money and your portfolio with Motley Fool Epic.

💵New Income System Could Pay You $4,243 Monthly
You could collect an average of $4,243 per month starting as early as next week with a new payout system for income investors. New registrations are being accepted for investors who want to be in a position to start with their first payout next week.

🚀Easy 92% Crypto Dividends (No Coins Required)
COIN stock doesn't pay a dividend... But there's actually a new way to collect a massive dividend that's indirectly based on the stock and offers a terrific monthly income (currently yielding nearly 92% on a forward basis).

🤝Free Advisor Match with Wiseradvisor.com
Don't leave your retirement to chance! Get matched with a trusted financial expert for FREE and make the most of your tax refund. Get started now.

⚠️Dennis Quaid's #1 Warning for Americans
Here's the thing: life doesn't come with guarantees. The economy shifts, markets stumble, and years of hard work could slip through your fingers like sand. But it doesn't have to be that way for you. So request a free copy of this Gold & Silver Guide that will arrive right to your doorstep when you act now.

 

 
 

Follow us on X, Follow us on Twitter