Bullish Risk-Reversal Trades on Plains Exploration (PXP)
Shares of Plains Exploration & Production Company (PXP) are trading higher on the session by 0.88%, at $36.58. The stock has been consolidating lower over the past three months and is currently testing the $36.00 historical support/resistance level.
With shares at a critical technical juncture, one trader is putting on a highly leveraged bullish position. A short while ago, the May 2013 $30/40 bull risk reversal traded 10,348 times at a net debit of $1.35. The $30 put was sold, near the bid, for $2.05, while the $40 call was purchased, on the offer, for $3.40.
With respective open interest of 0 and 82 contracts, this is clearly new positioning.
30-day Implied volatility is flat on the session, at 40.54%. This represents a large divergence to near-term historical volatility, at only 23.30%. Clearly the options market sees the potential for movement in the name over the next few weeks, perhaps to the upside, as the above trade suggests.
A potential catalyst could be Plains Exploration’s Q3 earnings report, which is scheduled for November 1st, before the opening bell.
Plains Exploration & Production Company is an independent energy company engaged in the upstream oil and gas business. The upstream business acquires, develops, explores for and produces oil and gas.
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