Patterson-UTI Energy, Inc. (PTEN) owns and operates fleets of land-based drilling rigs in the United States. The company provides pressure pumping services to oil and natural gas operators primarily in Texas and the Appalachian Basin. PTEN is currently trading around $30.13 in a 52 week range of $21.29 – 38.43. The company’s stock has been outperforming the market this year with shares increasing 18.87% year to date, however, oil stocks have been under pressure lately, since demand has been lower while crude supply has increased.
Today, a trader bought around 4200 PTEN Nov14 34.0 Calls at $0.80. This order involves this trader laying out over $336,000 in total premium. Shares have seen a drastic reversal in the last few days, as stock came off of last months highs. The underlying is trading underneath the Ichimoku cloud, indicating bearish momentum, and this trade might be a hedge against more downside movement for PTEN, as oil markets are seeing increased volatility in the near term.
Unusual Option Activity:
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/1usQnKR or through the only Unique Unusual Options Activity Scanner: http://bit.ly/1sCSaws
Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.
The Trades:
Buying the PTEN Nov14 34.0 Calls for $0.80
Risk: $80 for every 1 lot
Greeks of these Trades:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long
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