Traders Focus on Energy Cos As Oil Climbs

NEW YORK (Dow Jones Newswires), Jun. 1, 2009

The options market played host to robust trading in energy companies Monday as the price of crude oil shot above $68 a barrel.

Activity in Marathon Oil Corp. and Sunoco Inc. was particularly noteworthy as investors appeared to be "rolling up" bullish positions in the companies' near-term options.

Trading in Marathon climbed to four times the normal level with investors picking up 28,000 calls that allow them to buy the company's stock and 4,000 puts that allow them to sell it, according to Track Data.

Investors showed up early in the session to roll up mildly bullish positions in the company by selling July $34 calls they owned, and purchasing July $35 calls and July $36 calls.

The latter contracts are priced at $1 and make money if Marathon climbs above $37 before July 17. The stock recently traded for $33.23, gaining 4.2%.

There was similar action in the refiner Sunoco, where investors appeared to be unwinding out of June $32 calls and purchasing June $33 calls. That company's stock recently traded for $30.50, up less than 1%.

In Plains Exploration & Production Co., which is scheduled to present at an oil and gas investment symposium Tuesday, investors showed interest in longer-dated August $35 calls. Those contracts are priced at $1.95 and make money if Plains Exploration & Production rises above $36.95 before mid-August.

The stock recently traded for $30.53, up 8%.

Elsewhere, there was also considerable trading in the oil drillers Nabors Industries Ltd. and Transocean Ltd., as well as an exchange-traded fund that tracks those oil service companies.

Activity in Nabors zipped to four times the normal level, with investors picking up 15,000 calls and 6,000 puts. A bulk of the action took place in Nabors' July $20 calls, which are priced at $1.50 and make money if the company's stock rises above $21.50 - or 12% above the recent price of $19.12, up 7%.

In Transocean Ltd., meanwhile, one investor appears to have sold a "call spread" - selling August $60 calls and buying August $80 calls. The investor in this case could be cashing in on a bullish bet made in an earlier session or rolling up a bullish position to a higher strike.

Transocean recently traded for $83.29, gaining 5%.

The day's activity followed a rise in the price of oil, as well as the release of monthly manufacturing numbers that showed a degree of stability and growth in the United States and China.

In the U.S., the Institute for Supply Management reported that the U.S. manufacturing sector had contracted at a slower pace in May, performing better than analysts had expected.

In China, the Purchasing Managers Index showed that manufacturing activity had risen for the third straight month in that country.

The manufacturing data could have helped to fuel trading in a few dry bulk shippers, as well.

In DryShips Inc., one investor pursued a bullish call spread in September contracts - buying September $10 calls and selling September $15 calls. Priced at 95 cents, the position makes money if DryShips rises above $10.95 before mid-September - about 40% above the recent price of $7.81, down 4.9%.

"I think this is a great way to get long exposure to this stock because the (call spread) allows you to enjoy a 50% rally," said Steve Claussen, chief investment strategist for OptionsHouse. "You are giving away some upside but you're reducing your premium outlay by one-third."

Investors appeared to be locking in Genco Shipping & Trading Ltd.'s recent gains by purchasing near-term puts in the company. They scooped up batches of June $25 puts, for example, paying $1.05 for protection in case the stock slides lower.

Genco recently traded for $28.25, up 8%.  

Copyright (c) 2009 Dow Jones & Company, Inc.

Company: Marathon Oil Company more info
Operates 4 Offshore Rigs
 - Harvey's Wake Tempers Bullish Outlook for US Oil Output Growth (Sep 01)
 - RoyalGate to Drill New Well in Equatorial Guinea's Block Z (Sep 25)
 - ShaMaran Subsidiary to Contest TAQA Default Notice (Sep 21)
Company: Transocean Ltd. more info
Manages 46 Offshore Rigs
 - Oil's Biggest Rigs Headed to Junkyard as Daily Losses Mount (Oct 18)
 - Transocean To Buy Norwegian Rig Firm Songa Offshore For $1.1B (Aug 15)
 - Borr Drilling Signs Deal With Transocean to Buy 15 Rigs (Mar 20)
Company: Plains Exploration & Production more info
 - Noble, PXP Shake Hands on UDW Drillships for Gulf of Mexico (Apr 18)
 - BP Sells Non-Strategic GOM Assets for $5.5B (Sep 10)
 - PXP Posts Early Tender Offer Results for Senior Notes (Dec 01)
Company: Nabors Industries more info
 - Contract Driller Nabors Expects Current-Quarter Results To Fall (Aug 04)
 - Nabors Profit Takes Hit on Tough N. American Market (Jul 23)
 - Cultural, Strategic Changes Brighten Outlook for Nabors (May 24)
Company: Sunoco more info
 - Energy Transfer MLPs Sunoco Logistics And ETP To Combine (Nov 21)
 - Geospatial Completes Pipeline Mapping Projects for Sunoco (Jan 07)
 - Traders Focus on Energy Cos As Oil Climbs (Jun 01)
Company: Dryships Inc. more info
 - Dryships to Sell Stake to Fund Deepwater Drillships (Dec 03)
 - Dryships Seeks 4 New Ultra-Deepwater Drillships for $2.4B (Nov 23)
 - DryShips Appoints Interim CEO for Subsidiary (Jul 15)