Buy Put Options on Surgut, Calls on Tatneft, UralSib Recommends

Investors should buy put options on OAO Surgutneftegaz on speculation gains in Russia’s best- performing energy stock in the past six months weren’t warranted, UralSib said.

The brokerage also recommended buying call options on OAO Tatneft, the oil producer based in Russia’s republic of Tatarstan, on expectation the stock will gain after underperforming the market. Put options convey the right, but not the obligation, to sell a security at a specified price, and are sometimes used to insure against declines in a stock prices. Call options similarly convey the right to buy a stock, benefiting when share prices advance.

Surgut, Russia’s fourth-biggest oil company, has risen 63 percent in the last six months on the Micex Stock Exchange, while Tatneft has fallen 24 percent. The 12-member Micex Oil and Gas Index dropped 20 percent in the period.

“This gap between the share-price performance of Surgutneftegas and Tatneft (TATN) has no fundamental justification,” UralSib analyst Andrey Bogdanovich wrote in a report dated today. As the performance of these stocks “moves back into line” with Russian oil and gas shares, options investors may benefit from buying the bearish puts on Surgut and bullish calls on Tatneft.

To contact the reporters on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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