Options traders are changing their tune in a Canadian energy stock as sentiment turns bearish toward the sector.
Today, just the opposite happened:
- Someone sold 12,500 May 10 puts for $0.92.
- At the same second, he or she purchased a matching number of June 9 puts for $0.60.
- Volume was below open interest in the 10s but not the 9s. That suggests an existing position was closed and rolled to the lower strike.
- The transaction resulted in a net credit of $0.32.
Puts fix the price where a security can be sold, so they can profit when shares drop. Today’s trader apparently made money from the stock’s recent slide. Rolling the position recovered some of their capital and provides an additional month of downside exposure.
CVE fell 0.33 percent to $9.07 in afternoon trading, and is down 15 percent from its high in late April. It’s dropped along with other energy stocks as crude-oil inventories rise.
There was also heavy volume today in CVE’s June 11 calls, but the large blocks were below open interest. That may indicate existing bullish positions were closed.