Unusual Options Activity In Apache $APA

| August 12, 2015 | 0 Comments

Unusual Trading VolumeUnusual Options Activity In Apache $APA

As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week…

Apache $APA is an independent energy company focused on fossil fuels.  The company generates about $10 billion in revenues primarily from oil and natural gas production.  For a good description of the company, follow the link.

$APA is trading at $47.77, down 22% for the year.  That’s 53% below the 52-week high and 11% from the 52-week low.

So what does unusual options activity in APA tell us?

APA, like many oil and natural gas companies, has hit hard times over the past year.  The precipitous drop in the price of crude oil has really taken its toll on fossil fuel production companies like Apache.  In fact, the stock is down over 50% from this time last year.

Despite the obvious pricing pressure in the oil and gas industry right now, APA still posted better than expected results for last quarter.  The company is performing pretty well despite the circumstances.  After all, there’s only so much management can do when the price of oil has been getting hammered for so long.

Here’s the deal…

This week, a trader sold a large block of puts on APA.  Keep in mind, a put option makes money when the underlying stock goes down, so selling a put option benefits from a move in the opposite direction (or no movement at all).

Specifically, a trader sold 25,000 October 47.50 puts for $2.90.  The total cash collected for this trade is roughly $7.3 million.  Breakeven point for the trade is $44.60.  Given the open interest, this trade is likely an opening position.

Here’s the chart of $APA:

unusual option activity, a chart of $APA

APA has clearly been under pressure for the last year.  The stock has struggled as the price of crude oil has continued to fall.  The share price has been below the 50-day moving average for some time now, but it does appear to have ticked up in recent days.

This trade suggests APA may have put in a bottom.  The most recent earnings did shed some positive light on the company, despite headwinds from falling oil prices.

Moreover, $7 million is a pretty big bet that the stock isn’t going to drop below $45.  It’s even more aggressive considering there’s virtually unlimited loss potential with this type of put selling strategy.

More Options Trading Ideas…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

Yours in Profit,

Gordon Lewis

Note: Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.