Very Unusual Longer-Dated SandRidge Bullish Options Trading (SD)

Energy

Published: April 12, 2012 6:03 pm

Last Updated: April 28, 2020 9:19 am

SandRidge Energy, Inc. (NYSE: SD) made a meteoric move up with oil last year but has really suffered as natural gas prices have tanked. The stock rose 5% to $7.55 on Thursday but the action that really needs to be addressed is the flurry of Call options buying in the September 2012 $8.00 call options. The prior open interest was only 5,127 contracts and there were a whopping 21,731 contracts traded on that same strike on Thursday.

The last price went off at $0.96, implying that the stock would have to rise to above $8.96 before the September 21, 2012 expiration date for there to be intrinsic value in these options outside of any time value. Currently all there is in value is the time value and the price erosion here would in theory be close to one-penny each day if this moved in a straight line.

What is interesting in the amount of call options is that this 21,731 contracts represents more than all of the open interest in the September puts and calls combined from strike prices of $1.00 to $16.00 that we could see. That is also a larger amount of options traded than the open interest in any one of the single option strike prices in the April, May, and June expiration months.

Someone is making a big bet that SandRidge will somehow be unlocking much more value or that it will be rising with higher energy prices over the summer.

JON C. OGG

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