Schaeffer's Top Stock Picks for '25

Breaking Down This Big Energy Stock Bet

Options volume is running in the top percentile of its annual range

Managing Editor
Apr 20, 2020 at 11:08 AM
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Even though oil prices are sputtering today, a big winner on Friday, April 17, was WPX Energy Inc (NYSE:WPX). In light of Friday's breakout, options traders are blasting the energy stock, with a greater-than-normal tilt toward puts. 

Mid Friday, WPX put option volume was running in the top percentile of its annual range. Over 31,000 puts crossed the tape -- a whopping 50 times the intraday average. Most of this activity occurred at the November 2 put, where new positions were being opened.

A deeper dive reveals that most of the activity is sold-to-open. More specifically, it suggests one speculator sold to open 30,000 November 2 puts for 31 cents. If that's the case, the trader would keep the entire premium collected of roughly $930,000 (premium paid * number of contracts sold * 100 shares per contract) if WPX holds above $2 by the close on Nov. 20, when the contracts expire. To put the size of the trade in perspective, peak open interest of just 10,070 contracts is at the May 8 call.

As implied above, the penchant for puts skews against the typical trend. In the past 10 days, 9,278 calls have exchanged hands, compared to just 923 puts. However, WPX does sport a Schaeffer's put/call open interest ratio (SOIR) which ranks in the 87th annual percentile, suggesting short-term options players are also favoring puts over calls right now. 

Meanwhile, short interest continues to build, up 11.3% in the two most recent reporting period. The 35.92 million shares sold short accounts for almost 9% of WPX's total available float. But  there's much more optimism among analysts, 16 out of 19 rate the equity a "buy" or better, with zero "sells" on the books.

On the charts, WPX Energy stock is still down 69% year-to-date, even with today's rally baked in. And while the shares have more than doubled off their March 18 lows near $1.94, there's resistance looming overhead at their 40-day moving average.

Daily Stock Chart WPX



 
 

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