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OptionsNews
An ahead-of-the-bell look at the market's biggest stories and a review of unusual options activity. Filled with smart market analysis from the ONN.tv team, "Options News" turns the market's top headlines into trading intelligence, hosted by Karla Yeh.
With earnings in the past, a collar trade in Hess (HES) could suggest an investor is hedging a long stock position
On today’s Options News, Carrie Long and the www.ONN.tv team look at Tuesday’s pre-market price action in the broader market. Futures are sharply lower, as Australia’s central bank lifted rates for the second time in two months. European banking names are trending lower as well, putting pressure on the world’s markets.
At the close Monday, the Dow gained 76 points to 9,789 and the S&P 500 fell 6.7 points. The CBOE SPX Volatility Index (VIX) lost 0.9, remaining fairly elevated at 29.81.
Early Market Indications
Ahead of the U.S. market open, S&P 500 futures are down 7.5 points to 1,031.70, as the market is reacting to developments in other corners of the globe. Overseas, Hong Kong lost 1.7% on the day and European indices are lower across the board, down an average of nearly 2%.
Trading the December Collar in HES
www.ONN.tv Chief Investment Strategist Jud Pyle analyzes behavior in the Hess Corp. (HES, which saw some notable options activity on Monday in a collar trade. An investor appears to have sold off the potential upside returns in the shares in order to decrease the cost of downside protection.
The investor sold the out-of-the-money December 65 calls and bought the out-of-the-money December 50 puts. Specifically, the investor sold 1.5 calls for every 1 put purchased, selling 9,000 of the 65-strike calls while purchasing only 6,000 of the 50-strike puts. This trade crossed the tape around 1:30 PM Eastern Time. Based on the trade data at that time, the calls were sold for 60 cents, and the investor bought the puts for $1.75. That means the net cost of this trade to the investor was 55 cents.
HES did not announce any news of note yesterday, and the company announced earnings before the open last Wednesday, so it is not as though this report is looming as a catalyst. But the shares are down more than 10% from their near-term highs in October. Remember, this could be an investor who is long the shares. The investor could just be hedging that position, which would mean this investor makes the most money if the stock rallies because they are long the shares against the collar.
ONN.tv continues its webinar series tomorrow at 4:30 p.m. ET. Learn how the holiday season affects trading in the options world, and how to make the trends work for you. Sign up by clicking on the webinars tab at www.ONN.tv to reserve your seat. Sign up now – spots fill up quickly!
For more breaking news and investment pointers on the options market, stay tuned in to ONN.tv.
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