Oil prices are their highest levels for the year, and now some traders are fleeing from their bearish bets on energy stocks.
A weakening dollar is one of the big reasons why U.S. crude oil prices are once again trading close to $60 per barrel, their highest level since December. And energy stocks have been big beneficiaries of crude's rebound.
Exxon Mobil, which saw its first-quarter revenues slashed by 36 percent compared to the previous year, is up 3 percent this month. Despite the lower numbers, the nation's fourth-largest company managed to beat Wall Street's expectations when it reported on Thursday.
Fellow energy giant Chevron, which reports Friday, has rallied this past month as well, rising 6 percent. Chevron and Exxon Mobil together make up 28 percent of the ETF tracking the energy sector (trading under the symbol XLE) which has had a 6 percent gain in that time.
This has some traders closing out their bearish positions in the energy sector in order to avoid further losses. On Wednesday, when bulls in the options for the XLE outpaced bears by a ratio of 2 to 1, a trader sold 5,000 contracts of 75-strike puts expiring in June for a price of 45 cents each. As this was a closing trade, the trader is indicating that he or she no longer expects the XLE to see a price below $75—or nearly 10 percent lower than where the ETF finished the day on Wednesday—any time in the next two months.