Hey, they are actually buying options somewhere. This, from Briefing.
OPTNX Options Radar: Seeing large sized July call buying in oil names XOM, CVX & BP
With the stocks trading at 52-week highs and oil at all time highs, we’re seeing large sized July call buying in a few of the major oil names — XOM, CVX & BP — indicating potential positioning for continued upside in these stocks… In XOM, the activity is concentrated on the Jul 100 calls, with volume of 33.7K contracts vs open interest of 37.5K, pushing implied volatility higher by 4 pts to 27%. In CVX, the most volume has traded in the Jul 110 calls, with a total of 28.2K contracts trading vs open interest of 337, pushing implied volatility up by 4 pts to ~28%. In BP, the most volume has traded in the Jul 80 calls, with a total of 28.0K contracts trading vs open interest of 1750, pushing implied volatility up by ~5 pts to 26%… The focus on July contracts is notable, as it more indicates intermediate-term positioning for volatility, with exposure to the upside over the next two months (Jul expiration is 7/18).
I am not not not not not not calling a top in anything energy-related. Not will I at any time. But I would note that stocks to tend to top on increasing volatility, not decreasing. It’s akin to seeing an outside day on a chart, sort of a blowoff.
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Couldn’t those calls be part of a complex strategy?
They could be buying calls to participate in a 5th wave up blowoff, as they sell stock. Or they could be putting calls in place to safely short stock on the way up.
No?
yeah, hard to know exactly what they are doing with these. You can always look at a big option buyer two ways. Is he smart money or stupid speculation?
Here’s what I would say though. Not every spike in volatility a while into a strong uptrend will stop a move, BUT most moves stop on strong volatility.