A company called Benzinga wrote an article about some big people who bought or sold things related to another company, Devon Energy. They think these big people know something we don't and might make decisions based on what they do. The article looks at the prices that these big people are interested in for Devon Energy's stock. Read from source...
1. The article lacks proper structure and coherence. It starts with an introduction that does not provide any background or context for the reader. Then it jumps into a list of uncommon options trades without explaining what they are or why they matter. Finally, it ends with a vague description of expected price movements and volume data, without providing any evidence or analysis to support its claims.
2. The article is heavily biased towards bullish sentiment, as it only mentions the put options in passing and focuses on the more numerous and larger call options. This creates an impression that the market is optimistic about Devon Energy's prospects, but it does not consider the possibility of other factors influencing the options trades, such as hedging, arbitrage, or speculation.
3. The article uses emotional language and exaggeration to create excitement and curiosity among the readers. For example, it says "this isn't normal", "something is about to happen", and "track the liquidity". These phrases are meant to appeal to the reader's fear of missing out or their desire for insider information, but they do not provide any substance or credibility to the article.
4. The article does not cite any sources or references for its data and analysis. This makes it impossible for the reader to verify or replicate the findings. It also raises questions about the reliability and validity of the options scanner that the article relies on, as well as the accuracy and objectivity of the author's interpretation of the data.
The overall sentiment of these big-money traders is split between 60% bullish and 40%, bearish.
1. Bullish scenario:
- Buy DVN calls with a strike price between $35 and $40, expiring in December 2021 or January 2022. These calls will benefit from an increase in the stock price above the strike price, giving you a potential return of 20% to 40%. However, these calls also have a higher risk of losing value if the stock price falls below the breakeven point, which is the strike price minus the premium paid.
- Example: Buy DVN Jan 2022 $40 call for $6 per contract. If DVN reaches $50 or higher by January 2022 expiration, your call option will be worth $14 per contract ($50 - $40 + $6), giving you a profit of $8 per contract ($14 - $6). However, if DVN falls below $34 by January 2022 expiration, your call option will lose all its value.
- The bullish scenario assumes that Devon Energy will continue to outperform the market and benefit from higher oil prices, increased demand for natural gas, and positive earnings surprises. It also assumes that the options market is accurately pricing in these expectations.
2. Bearish scenario:
- Sell DVN puts with a strike price between $35 and $40, expiring in December 2021 or January 2022. These puts will benefit from a decrease in the stock price below the strike price, giving you a potential return of 10% to 20%. However, these puts also have a higher risk of losing value if the stock price rises above the breakeven point, which is the strike price plus the premium received.
- Example: Sell DVN Dec 2021 $35 put for $4 per contract. If DVN falls below $31 or lower by December 2021 expiration, your put option will be worth $6 per contract ($31 - $35 + $4), giving you a profit of $2 per contract ($6 - $4). However, if DVN rises above $39 by December 2021 expiration, your put option will lose all its value.
- The bearish scenario assumes that Devon Energy will underperform the market and face headwinds from lower oil prices, reduced demand for natural gas, or negative earnings surprises. It also assumes that the options market is overpricing in these expectations.