Fri, Apr 30 2010, 04:42 GMT
by Andrew Wilkinson
HAL - Halliburton Co. – Making sense of options activity on oil company, Halliburton Co., this afternoon is difficult due to the chaotic and seemingly pattern-less trading taking place on the stock. Investors exchanged more than 200,000 contracts on HAL by 3:00 pm (ET), which represents approximately 37% of total existing open interest on the stock of 541,062 contracts. Frenzied options trading was catalyzed by news the firm is assisting in ongoing investigations regarding the oil spill in the Gulf of Mexico as HAL reportedly provided a variety of oilfield services to Deepwater Horizon rig, which is the rig that caught fire and sank last week. Options volume and options implied volatility on Halliburton jumped while its shares slipped 6.3% to $31.26. The surge in demand for option contracts on the stock, coupled with uncertainty regarding possible repercussions stemming from HAL’s connection to the situation in the Gulf of Mexico, lifted the overall reading of options implied volatility 25.4% to 44.13% as of 3:25 pm (ET). Trading activity is heaviest in the May contract with decent volume building in both call and put options. Some bearish investors bracing for continued share price erosion purchased about 2,200 puts at the lowest available strike – the May $25 strike price – for an average premium of $0.16 apiece. Buying interest in put options was also apparent at the May $26 strike where 1,800 puts were picked up for an average premium of $0.20 each. May $29 strike puts were the most heavily trafficked as more than 16,700 contracts changed hands by 3:22 pm (ET), versus previously existing open interest of just 2,743 contracts at that strike. But, the put action was certainly not one-sided as investors took to buying and selling the contracts, with buyers gaining the right to sell the stock at $29.00, and sellers receiving an average premium of $0.81 per contract in exchange for bearing the risk of having shares of the underlying stock put to them at $29.00. Similar two-way trading traffic in calls took place at out-of-the-money strike prices as some traders threw in the towel on bullish stances expiring in May. Meanwhile, contrarian players purchased out-of-the-money calls, perhaps to prepare for a potential rebound in the price per share ahead of expiration next month.
IPG - Interpublic Group of Cos., Inc. – Advertising and marketing services firm, Interpublic Group of Companies, enticed bullish options investors during afternoon trading after revealing a narrower first-quarter loss of $0.15 per share as compared to a loss of $0.16 per share in the same period last year. IPG’s shares rallied 4.6% earlier in the session to an intraday high of $9.70, which is just $0.23 off the stock’s current 52-week high of $9.93 attained back on April 20, 2010. Options-optimists expecting continued bullish movement in the price of the underlying stock through May expiration purchased 4,800 calls at the May $10 strike for an average premium of $0.30 each. Interpublic’s shares must break through the current 52-week high and surpass the average breakeven point on the calls at $10.30 in order for call-buyers to accrue profits by expiration day in May.