Oil and gas exploration company Antero Resources (AR) is up 13% over the past year, bucking the energy sector’s decline as a whole. However, amid the tariff uncertainty, one trader sees further downside in the weeks ahead.
That’s based on the May $25 puts. 21,670 contracts recently traded compared to a prior open interest of 123 contracts, for a massive 176-fold rise in volume on the trade. The options have 36 days left until expiration, and recently traded for about $0.80.
Antero shares recently traded for about $31.50, so shares would need to decline by about $5.50, or about 20%, for the option to move in-the-money.
While that move may look large, shares have recently collapsed from a 52-week high of $42.63 back in March.
Operationally, Antero has had a fair year. Revenues only rose by 2%, but earnings jumped by 113%, which has helped the stock outperform its peers in the energy sector.
Action to take: Antero shares are currently taking a hit with the rest of the overall stock market. However, with shares trading at 10 times forward earnings, Antero could be well positioned to recover with markets start to calm down and trend higher.
For traders, the May $25 puts play well to the stock market’s short-term fears on tariffs, which may take a few weeks to play out. The options are inexpensive enough to see high double-digit returns, if not more depending on the severity of the market selloff.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
