Penn West Petroleum Ltd. (PWE), formerly Penn West Energy Trust, is a Canadian exploration and production company. Penn West is engaged in the business of acquiring, exploring, developing, exploiting and holding interests in petroleum and natural gas properties and related assets. PWE is currently trading around $5.92 in a 52 week range of $5.86 – 11.75. The company’s stock has been underperforming the market this year with shares decreasing 29.30% year to date, as oil stocks continue to get hammered in the recent past.
Today, OptionHacker flagged over 20,000 PWE Mar15 6.0 Puts for an average of $0.90. This order involves this trader laying out over $1,800,000 in total premium. Shares are currently trading around the 52 week low, and the underlying is trading underneath the Ichimoku cloud, indicating bearish momentum. As the popular saying goes, “The trend is your friend,” which might indicate that this trader is looking for the stock to keep heading lower, as oil prices have continued to drop lower in the recent past.
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 PWE Mar15 6.0 Puts for $0.90
Risk: $90 for every 1 lot
Greeks of these Trades:
Delta: Short
Gamma: Long
Theta: Short
Vega: Long
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