SandRidge Energy Inc. option trading jumped to almost nine times the four-week average as investors boosted bets that the oil producer will rebound after the biggest intraday drop since December 2008.
Volume exceeded 121,000 contracts after investors initiated bullish risk reversal strategies by selling more than 19,000 December $5 puts and buying the same number of December $6 calls, according to a report today from Susquehanna International Group LLP. Traders also purchased about 10,000 January $6 calls while selling the same number of January $7.50 calls, a strategy known as a call spread, Susquehanna said.
“Investors are looking for shares to rebound,” Susquehanna’s Bala Cynwyd, Pennsylvania-based options strategists wrote. “This risk reversal has now traded over 30,000 times in the past few days.”
SandRidge shares tumbled 14 percent to $5.20 today after the company’s quarterly report. SandRidge posted profit excluding some items of 23 cents a share, compared with the 12- cent average estimate of 18 analysts, according to data compiled by Bloomberg. UBS AG’s William Featherston said the company actually lost 2 cents, if SandRidge’s accelerated removal of oil and gas hedges is stripped out.