Unusual Options Activity: Permian Resources (PR)

Oil and gas exploration company Permian Resources (PR), is up 59% over the past year, bucking the overall sideways or down returns for energy stocks. One trader sees a potential pullback over the summer.

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  • That’s based on the September 20 $15 puts. With 74 days until expiration, 1,560 contracts traded compared to a prior open interest of 100, for a 16-fold rise in volume on the trade. The buyer of the puts paid $0.65 to make the bearish bet.

    Permian shares recently traded for about $16.80. So shares would need to decline by about $0.80, or just under 5%, for the option to move in-the-money.

    Permian is close to its 52-week high of $18.28, but is starting to trend higher once again. It’s easy to see why, with earnings up nearly 44% and revenues jumping by 102% over the past year.

    Even with that move higher, shares are valued at 10 times forward earnings, less than half the valuation of the overall stock market.

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  • Action to take: Investors may like shares here, as they’re likely trending towards retesting their prior 52-week highs. Plus at current prices Permian pays a solid 4.8% dividend.

    For traders, the September $15 puts look unusual as shares are back in an uptrend. A better play may be the October $18 calls. Last trading for about $0.65 they could see high double-digit returns.

     

    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.

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