Unusual Options Activity: Enerplus Corporation (ERF)

Oil and gas exploration company Enerplus Corporation (ERF) has slid in recent weeks as oil prices have trended lower. One trader sees a further decline in the weeks ahead.

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  • That’s based on the April $14 puts. With 28 days until expiration, 2,723 contracts traded compared to a prior open interest of 113, for a 24-fold rise in volume on the trade. The buyer of the puts paid $0.58 to make the bearish bet.

    Shares recently traded for about $14.15, so the stock would only need to drop about 1 percent for the options to move in-the-money. That’s still well over the stock’s current 52-week low of $11 per share.

    Enerplus looks reasonably attractive now, with shares trading at less than 5 times forward earnings. Plus, the company has a fat 42 percent profit margin right now. But that will likely shrink if a slowing economy keeps a check on energy prices from moving higher.

    Action to take: Shares yield a mere 1.6 percent, so there are better places to go long and grab a decent income in the energy space right now. Interested investors can wait to buy at a lower price.

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  • For traders, the April $14 puts are a solid short-term play for today’s volatile markets. Traders can look to grab some quick mid-double-digit gains on a down day for shares.


    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 of the companies mentioned in this article.