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Even as these stocks have held up during increased oil volatility, it appears the options market is pricing in a move lower.
Nathan noted that in an eyebrow-raising trade on Wednesday, someone bought 93,000 of the December 33-puts for 42 cents each. That is a nearly $4 million bet that oil and gas stocks will fall below $32.58 by December expiration — 15 percent lower from current levels. "That's a long ways from here, especially if you consider how well these stocks are acting," Nathan explained.
Energy stocks have been on a massive downtrend from the 2014 highs, and are now right up against that $40 level. "So again, this may be a way out of the money, protection against the portfolio of energy stocks looking for a breakout."
The XOP was trading at the $38.60 range during Thursday's session.
