Call selling ahead of Pride International (NYSE: PDE) earnings

Investors looking to buy call options in Pride International (NYSE: PDE) have a plentiful supply thanks to at least one call seller boosting later-dated option volume a couple weeks before the company’s earnings report.

More than 6,700 July 35 calls have crossed the tape versus current open interest of 473 contracts, meaning investors traded these options to open. The calls are currently up five cents on the day to $1.25 per contract with the stock up 15 cents to $29.55, computing to an implied volatility of 39. This compares to a 30-day historical volatility of 30.

Investors who are short these calls are expecting the stock to hit a ceiling around $36.25 and close below that level by July options expiration. This call sale could also have been initiated by someone who owns shares of the stock. They could be selling these calls to collect some income on a bet that the shares will not go higher than the $36.25 level.

PDE shares reached a 52-week high in October of roughly $34, and the stock has sold off roughly 25% since then. The call-selling action we saw today is a moderately bearish play on the oil and gas drilling company because the stock could climb 22% throughout the next six months and the call option sale would remain profitable.

PDE is scheduled to announce earnings on Feb. 18 before the market opens, and analysts estimate earnings of 17 cents a share.