Unusual Options Activity: Marathon Oil (MRO)

Energy giant Marathon Oil (MRO) has had strong performance on rebounding oil prices in recent months. But one trader sees an end to the party.

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  • That’s based on the July $15 puts. With 121 days until expiration, 5,055 contracts traded against a prior open interest of 111, for a 45-fold rise in volume. With shares around $12, the option is already $3 in-the-money.

    The trader paid $3.90 for the contracts on average, or about only $0.90 in time premium.

    Marathon shares have nearly tripled since early November, in spite of the company seeing its revenue slide by one-third in a year and with shares sporting a deep loss right now.

    Action to take: Making this bet is a bet against the current trend of rising oil prices and the strong performance in energy. As a put option trade, it’s an inexpensive bet against a further rise in energy prices between now and July.

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  • That’s a small bet worth making, as any drop in the space could lead to massive profits on the short side. For traders, however, look for a mid double-digit gain on this trade on any short-term market fears. With the economy reopening and the summer driving season kicking in near the end of this option, a quick profit is the better play here.

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