Energy bulls exploring opportunities
02/09/17

Oil bounced at a 10-week low yesterday, and traders were drilling for opportunities in the sector.

Heavy call volume was detected in several energy companies, led by ConocoPhillips (NYSE: COP) and EOG Resources (NYSE: EOG).

COP’s April 52.50 calls (options to buy a security) appeared less than an hour after the opening bell, with large blocks purchased for $0.93, $0.94 and $1.21. Volume at the strike swelled to over 13,000 contracts as orders continued through the early afternoon.

Energy had a wild ride on Wednesday after oil inventories rose much more than some expected. Crude fell immediately after the news, only to bounce after holding its lowest level since December 1.

EOG’s buyers went to work after the government’s report, amassing almost 12,000 March 100 calls for $2.28 to $2.45 in less than 30 minutes. That dwarfed recent activity in the company, which has seen volume of about 6,000 contracts per session in the last month.

COP rose 0.36 percent to $49.60 and EOG climbed 0.98 percent to $98.14. Both companies have pulled back after hitting 52-week highs in December.

While oil has struggled with greater supply from domestic producers, some analysts have predicted conditions in the futures market will improve in the second half of the year. There has also been positive market reaction this year after regulations in the industry were changed.

A large trade also appeared in the United States Oil Fund, which tracks crude prices. A block of 30,000 March 11 puts was sold and an equal number of March 10.50 puts were bought for $0.13. Puts are the opposite of calls, letting investors make money to the downside with a right to sell shares (or lose their premiums if the securities don’t move south). USO rose 0.31 percent to $11.23.

Wednesday’s activity comes one session after buyers piled into the March 20 calls on pipeline firm Energy Transfer Equity for $0.43. Those same contracts appreciated roughly 50 percent since first being spotted.

In summary: It seems action in the energy sector has continued to heat up.